Wednesday, March 01, 2017

JIO Effect - M&A Will Leave Just 5 Mobile Operators in India

If you see it correctly, Reliance Industries backed Jio had made a turbulence in the Indian telecom market. On the consumers' table Jio is playing by offering free data voice and digital services - which is actually disrupting the market by price game and service front. Jio continues to offer free services and extends it upto March 31, 2017 inspite of the complaints by the incumbents.

When we came to know about the existence of Jio, that's back in 2010 while Reliance Industries acquired pan India broadband spectrum winner Infotel Broadband (owned by Nahatas) just after the auction ended. RIL owned Infotel Broadband has gone through the makeover and it's now Reliance Jio Infocomm Ltd, a platform to offer digital services including 4G/LTE voice, LTE data, mobile TV, online music and movies, news, fiber broadband and many more. The plethora of RJIL services are being now offered under simple branding of 'JIO'.

We all know these, but in 2010 Indian telecom market was exploding with 12-13 operators in each circles. However in 2012 February Supreme Court cancelled the licenses issued in 2008; as a result many operators shut their stores across the country or partially - STel, Cheers Mobile left the business. MTS India, Videocon, Tata Docomo stopped services in few circles, Loop did not renew licenses and was sold to Airtel. After 2012, India's telecom sector had handful of operators - Airtel, Vodafone, Idea, BSNL, MTNL, Reliance Communications, Reliance Jio, Tata Docomo, Aircel, Telenor, MTS India and Videocon. (last 4 operators did not have pan India spectrum)

From 2010 to 2015 - every year I had a talk with Tarun, the founder of Telecomtalk that 'yeh saal sayed Mukesh Jio 4G launch karega' but it did not happen. In February 2015 Jio brought Jionet WiFi at Kolkata and therefore Jionet WiFi was extending to other cities too. However after the Q1 of 2016 we were getting hints that Jio is now on its way to launch LTE to aam admi very soon.

In 2012 Airtel became the first Indian operator to start LTE services but in next 3 years (2013-2015) Airtel had mere presence in 4G/LTE market. And these 3 years people are on not-so-nutritious 3G meal and getting frustrated, and don't ask me of 4G that time. Airtel 4G had a worst LTE coverage.

Let's point to Jio, Oil and natural gas made Mukesh Ambani rich, very rich and he infused vitamin-M maximally to his dream telecom project - Jio. As per latest report India's telecom market values to $ 27 bn and Mukesh Ambani is investing $ 30 bn to his telecom venture, Jio. Hence existing operators are in the consolidation mode.

Before Jio begins its so-called-commercial services with complete free offer, the consolidation started already among the debt ridden telecom companies. Videocon sold its spectrum to Airtel in 6 circles, Aircel sold its entire 2300MHz (BWA) spectrum to Airtel (in 8 circles). RCom planned to merge its consumer business with Aircel and Sistema Shyam Tele (operates as MTS India). Apart from these Tikona had made unsuccessful meeting with Vodafone, Tata Tele and Telenor had also a talk but nothing worked. Augere Wireless sold its Indian business to Airtel. Telenor has announced to sell its Indian venture to Airtel - which will be done over one year. 

List of Airtel's acquisitions over last few years - 

Augere 2.3GHz spectrum in MP&CG
Aircel 2.3GHz spectrum in 8 circles
Videocon 1.8GHz spectrum in 6 circles
Telenor 1.8GHz spectrum in 7 circles
Tikona            2.3GHz spectrum in 5 circles

** It should be noted that all spectrum are liberated i.e. 4G-ready.

Update: Tata Tele wants to be merged with RCom-MTS-Aircel, as reported by ETTelecom. However the dispute with NTT Docomo and huge debt (which is an obstacle for every operator, anyway) may block the merger. 

Update: On 28th February, 2017 the dispute with NTT Docomo comes to an end, only hurdle Tata Tele has to clear that is payment to NTT Docomo in accordance to RBI rules and regulation for foreign investment policy. Once the payment to NTT Docomo is done by Tata Tele, it will be in a better position for merger. Also Tata Sons plans to infused a Rs 10,000 crore to Tata Tele to clear up the debt as much as possible.

Update: Airtel announced they will acquire BWA spectrum from Tikona in 5 circles, thus Airtel will have pan India 2300MHz spectrum (20MHz x 22 circles) - that is same as Jio. 

Jio came in the market with a bang - free data and voice for 3 month, later extends the offer till end of March 31 despite the objections made by incumbents. Jio, boosted by huge financial backbone from India's richest man Mukesh Ambani is now examining the patience of its competitors - how much they can bleed?

On the LTE/4G race, only Airtel seems to be properly armored against Jio. Vodafone and Idea are late comer in LTE market and their entry on 4G turf is being spoiled by Jio's entry. Though in 2016's auction both Vodafone and Idea has acquired significant amount of spectrum on 2500MHz band, they are left behind by Airtel and Jio in term of the new generation mobile telephony roll out.

The operators will continue services after all merger and acquisitions :

1. Vodafone-Idea
2. Airtel
3. RCom-MTS-Aircel-Tata
4. Jio
5. BSNL/MTNL (both are state owned)

MVNOs will fill the gap ? This is a tough question to answer right now 'coz right now the market is undergoing several reshapes. 
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