2016 - EMERGENCE OF A NEW TELECOM GIANT
By Ruma Dubey
2016 is going to be BIG for Mukesh Ambani. While younger brother is into everything – right from defence to infrastructure, elder brother is slowly but surely building his predominance in his core business – petrochemicals and now telecom.
Mukesh Ambani has always done everything king style, huge, larger than life. His foray into Indian telecom is not small – its huge to put it lightly, nearly Rs.34,000 crore. Apart from a 4G wireless service, Reliance Jio will provide broadband internet services in 900 cities and towns using optical fibre for which it has finalised agreements with partners required for the roll-out. Ambani also plans to make Reliance a TV provider by building a superfast fiber-optic network stretching into homes in urban areas and it has already started laying down underground fiber-optic cables in parts of India that will connect cell towers to the core network.
The company, on Sunday launched its 4G services for its employees, ahead of the full commercial roll-out in March 2016. It offers 4G LTE connectivity for data and voice, currently the fastest and latest generation of cellphone network coverage. Jio will not revert of older technologies like 3G or 2G.
This telecom venture of Reliance currently holds 2300 Mhz spectrum across India – this is 800 Mhz in 10 circles and 1800 Mhz in six circles. Reliance has the largest spectrum bank in India and this means, the others – especially Bharti Airtel could now have sleepless nights. In fact, last year itself when Reliance announced its plans, Credit Suisse put out a report on Bharti, downgrading the stock to ‘underperform’ from ‘neutral’. In the report, Credit Suisse has stated that competition from Reliance’s Jio, given the large spectrum holding and ongoing large-scale investments, could pose some serious competition for Bharti. RJio, at the time of launch itself can add 60-80% of Bharti’s current capacity.
And Jio is not looking at doing things in a dull staid manner, rolling out things just to get it over and done with. It is going to do all kingsize – the 4G roll out, apart from high internet speed, promises advanced voice calling service using voice over LTE (VoLTE) technology. This roll out is expected to be the biggest outside Japan and USA. 4G could help connect entire India as internet can enter every house in all parts of India through a mobile device, through broad band services. Currently only Bharti provides 4G but it is restricted to only data, no voice telephony is allowed.
RJio has launched free wi-fi spots in eight locations at Ahmedabad and nine locations at Baroda and Surat. The company is working on rolling out the 4G services at the earliest and is planning to launch its own branded 4G handsets. For this, it has roped in ex-Blackberry India chief, Sunil Dutt. The target of RJio is to launch its service in this year and ensure his network reaches 50% of rural India by 2016 – that was the rule laid out when the spectrum license was acquired.
There was a time when a wired landline was the only way to talk. Then came wireless communication or the revolutionary mobile telephony. 2G ushered in basic data and SMS services. A decade after that, 3G evolved and data access was at faster speeds with innovative applications. But when Apple launched its iPhone and Google its Android, the world changed forever. Today, we are at an intersection where internet technology has converged with mobile technology. And this convergence has shrunk the world, flattened it. This mass adoption of connected digital technologies and applications by consumers, enterprises and Governments is the revolutionary movement of digitization, which has completely changed the face of the telecom sector.
Chetan Sharma Consulting studied the revenue growth patterns for 65 leading operators in 30 major global markets to understand when the revenue in certain segments rise, stagnate and fall. In majority of the cases it was learnt that once subscriber penetration approaches 70-90% band in a given segment, net revenue peak, then stagnates and then starts declining. In this report, Sharma (2012) has stated that the revenue curve for voice is already on the decline in major developed countries like Japan, US and Western Europe. The messaging revenue curve is on the decline in Philippines, Netherlands, Taiwan, Spain and Italy and has approached saturation in UK, France and USA. In emerging nations, both voices as well as messaging revenue curve are on the growth phase. The third revenue curve of access or data is on the rise all around the world though margins are under pressure to keep up with the growing costs. Sharma (2012) talks about the 4th wave – a basket of some more innovative products, most of which are yet to be developed but sure to take the sector by storm. And he says that unless telecom companies are ready with the right strategy to tackle this 4th wave, their revenues could decline precipitously. He has also warned that unless telecom companies become enablers and digital lifestyle service providers and not merely provide access, they will become like utility companies – large revenues but margins shrinking from 30-40% to 8-12%.
The Indian telecom sector is at the cusp of major change. We are evolving from voice to data and the future will be convergence, which is what Rjio is attempting to take us. There is no doubt that Rjio will shake up the sector and rightly so, unless Bharti moves faster, it could hit a bump.