Most of the impacts on the Indian telecom industry, due to R Jio’s three years of operation, are very visible in the market and to any common man. The purpose of this blog is to summarize those impacts with the help of facts and figures. Data used in this blog are collected from different sources and they are:
More the users, Bigger the industry
Introduction of Reliance Jio cellular service triggered an unprecedented surge in the number of subscribers (Figure-1). In the inial days of R Jio, an increase in the number of telecom subscribers exceeded the statistical forecast prepared based on historical data. However, as time passes, the industry couldn’t keep up the growth rate.
However, now the Indian telecom economy is bigger by 57 Million subscribers than the most probable estimates as on 31-Aug-2019 without R Jio.(Actual number of subscribers of 1.173 Billion as on 31-Aug-2019 and the most probable estimate without R Jio as on 30-Sep-2019 i.e 1.116 Billion) (Figure 1)
Figure(1): Total number of wireless subscribers in India Vs. Forecasted numbers without R Jio as a player.
Lesser the cost of mobile data; More the affordability.
Over the last 5 years, the global telecom industry witnessed a drastic decline in the cost of mobile data (Figure -2). In tandem with the global trend, mobile data cost in India also reduced from 3.55 % of the average monthly income of an Indian in 2015 to 0.45 % in 2019.
Figure(2): Cost of 1GB data in low-income countries (as % of Monthly income).
From Figure-3 it is evident that the R Jio was the catalyst for the reduction in mobile cost especially in 2018 and 2019. However, the looming tariff hikes will have an adverse impact cost of mobile data.
Figure(3): Cost of 1GB in India (as % of Monthly income).
More the speed; Faster the engagement.
We don’t have enough data to suggest any impact on the speed of broadband connection due to R Jio. However, from 2017 till 2019, we see a steady improvement in broadband speed in India. From 2017 to 2019, India improved its global ranking on broadband speed to 74 from 119. Figure-4 depicts the global ranking of different countries in the Asia& Pacific region. It is worth noting that Taiwan from the region holds world’s #1 position in 2019.
Figure(4): Global ranking based on broadband speed (2017-2019)- Asia& Pacific region.
Let’s unite and fight:
While R Jio stimulated the growth of the telecom subscriber base in India, it has badly eaten up the market share of other players in the industry (Figure-5). By mid of 2018 and after, many major players in the industry joined hands together to withstand the storm unleashed by R Jio. (Refer circled areas in Figure-5). While the combination of Vodafone and Idea was disappointing as the joint market share further declined over the period time, the combination of Bharati and Tata teleservices shows the sign of stability.
Another interesting aspect of the situation analysis is the future of BSNL, a state-owned (PSU) telecom company. Disinvestment of this loss-making PSU is around the corner. Would the debt-ridden companies like Bharati or Vodafone be interested in this deal to increase their customer base? Most probably not.
Figure(5): Number of subscribers per month.
Lesser the players; Fewer the options
Post R Jio, India telecom industry witnessed a steady decline in the number of players in the Indian telecom industry (Figure-6). The number of players in the industry dropped to 6 from 12 in Sep-2016. While some of the service providers ended their service, others decided to join hands with other players in the industry. This trend is most likely to continue especially for those companies having high operating and financing costs.
One obvious effect of this consolidation activity is the loss of employment. The estimated number of job cuts in the telecom industry was 60,000- 75,000 in 2018-19 and it is expected to continue in 2020 also.
Figure(6): Number of services provides per month.
Lesser the confidence; smaller the price
For all major players, performance in the stock market was disappointing in the R Jio era (Figure-7). No major player in the industry, except Bharati Airtel, was able to rebound. The credit of this recovery partly goes to the purchase of Tata Teleservices’ wireless mobile business and partly to the common agreement in the industry to increase the tariff.
However, it is difficult to expect any further increase in Bharati’s share price in near future due to the lack of positive momentum in the customer base, increasing borrowing cost, declining operating profit, etc.,
Figure(7): Share price. Prices are in INR.
Bigger the committed cost; higher the risk
The common trend in the industry is high borrowing costs and declining operating profit (Figure-8) which questions the very existence of the companies since they cannot afford to have big tariffs undercuts, further borrowing o new capital infusion through primary market.
They can breathe a sigh of relief because of the common agreement reached by all players in the industry to increase the tariff. However, many major players continue to lose their customer base as long as R Jio offers cheap service. Any major decline in the revenue further reduce the number of players in the industry.
Figure(8): Summary Profit and Loss. Amounts are in INR.
Together build stronger
The overall financial position of the major industry players are not promising in the post R Jio era (Figure -9). Spending on capital projects is reduced, which could affect the long term earning capacity of the entities. Borrowing and other liabilities are disproportionally increased compared to the addition of total assets.
Bringing radical changes through acquisitions could be difficult but adapting the latest technologies to improve service quality, concentrating on neglected parts of the country, reduction in OPEX cost through Robotic Proces Automation, AI, etc., could help them to improve operating profit. Finding new avenues for joint operations, attracting fresh capital( at the cost of loss of ownership), etc, also might be explored by the companies to flourish in the future.
Figure(9): Summary financial position. Amounts are in INR.
Because of R Jio, Indian mobile users got cheap mobile data, much faster broadband internet and more people started using mobile services and the internet.
But the telecom industry in India has been sabotaged. Industry witnessed loss of job opportunities, stress on lenders due to a lack of enough profit in the industry to repay the loan.
In the future, be prepared to pay more for mobile services and the internet if one or a few companies managed to gain undue influence on the price tariff fixation.