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NEW DELHI: India's bruising telecom price war unleashed by the entry of Mukesh Ambani-owned Reliance Jio into the sector may continue for at least a year or as long as it takes Jio to nearly double its user base.
Reliance Jio, which stormed the sector with free calls and data forcing rivals to merge or exit as revenues declined, has amassed 21.5 crore subscribers since its 2016 launch. Agrawal estimates the company will now aim for a dominant market share after turning the industry into an oligopoly and as India’s mobile users inch up to 1.2 billion over two to three years, from 1.13 billion currently.
The carrier’s market share surged to 18.2 per cent in May from about 10 per cent a year earlier, according to regulatory data compiled by Bloomberg. Reliance Jio didn’t answer an email seeking comment.
A dominant position in a “three-way battle” between Reliance Jio, Bharti Airtel Ltd. and a proposed combination of Vodafone's India unit and Idea Cellular would require at least a 33 per cent share of subscribers, Agrawal said. That puts Reliance Jio’s “minimum subscriber threshold” before looking to increase average revenues per user at 40 crore, he projected.
“There is a lot of pain ahead before it gets better,” he said.
Ambani’s telecom unit “will strive to double subscribers to 40 crore before raising prices,” Kunal Agrawal, a Hong Kong-based analyst with Bloomberg Intelligence said in an emailed response to questions. “We expect cut-throat pricing and weak average revenue per user to continue over the next one-to-two years, possibly increasing balance sheet leverage for other domestic telecom incumbents.”
Reliance Jio, which stormed the sector with free calls and data forcing rivals to merge or exit as revenues declined, has amassed 21.5 crore subscribers since its 2016 launch. Agrawal estimates the company will now aim for a dominant market share after turning the industry into an oligopoly and as India’s mobile users inch up to 1.2 billion over two to three years, from 1.13 billion currently.
The carrier’s market share surged to 18.2 per cent in May from about 10 per cent a year earlier, according to regulatory data compiled by Bloomberg. Reliance Jio didn’t answer an email seeking comment.
A dominant position in a “three-way battle” between Reliance Jio, Bharti Airtel Ltd. and a proposed combination of Vodafone's India unit and Idea Cellular would require at least a 33 per cent share of subscribers, Agrawal said. That puts Reliance Jio’s “minimum subscriber threshold” before looking to increase average revenues per user at 40 crore, he projected.
“There is a lot of pain ahead before it gets better,” he said.
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