Telecom has by far been the most challenging business in India. Technology, regulations and customer behaviour have kept operators on their toes, testing their adaptability and staying power. Mukesh Ambani’s widely anticipated second coming has sent shock waves in the industry once again. After all, he has gone on the offensive, disrupting a segment that today brings in 80% of the revenue for most operators.
Jio’s offer to make voice calls free will shift the game to data for which Reliance seems well prepared than most other operators who are still strengthening their network, that too at a time when customers are craving for it. To be fair, not that the incumbents did not anticipate the change but financial constraints seem to have deterred them from fronting this dramatic shift. They were wary of the immediate and significant drop in revenue before data could become the overarching contributor.
After Mukesh Ambani shook up the industry the first time in 2002, it resulted in explosive growth but Reliance could not cash in owing to poor execution. That growth was driven chiefly by Reliance’s move to make incoming calls free, which quickly became the industry norm. This time, too, a surge in data consumption could well be the outcome.
But the real question is: can operators really manage to make a decent return given the falling tariffs and the mammoth investments that have been made? The commoditisation of data services should be a bigger worry for operators as it leaves little room for tariff plan differentiation, thus making it a fixed return business.
That is why there is increased talk of consolidation in the sector. The weaker players are already out and ultimately it is the top three that are likely to survive. Vodafone and Idea Cellular are in talks and Airtel has acquired Telenor’s India assets. How the data war could play out is the focus of this issue’s cover story. Among other stories we have an investing feature on DCB Bank which wants to grow the good old way – by opening more branches. See Rising Star to know more.