With the formal launch of Reliance Jio's 4G commercial services earlier this month, India's older operators are on the defensive and have started taking measures to prevent their subscribers from moving to RJio's network.
Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India's largest service provider, seems to be on a strong footing, with deep pockets, sufficient quantities of spectrum and the wherewithal to put up a strong fight. Similarly, Vodafone India is known to have a high percentage of heavy-spending customers and is also backed by a very strong parent company, which places it in a somewhat better position to fight Reliance Jio than other players.
Idea Cellular Ltd. appears to have greater cause for concern. It has limited 4G spectrum holdings and a customer base largely made up of middle- and lower-income subscribers, making it more vulnerable to RJio's onslaught.
In a recent investor presentation to the Bombay Stock Exchange, Idea presented its strategy for retaining customers who might be drawn to RJio's offer of free voice and low-cost data services.
"Idea currently is focused on expanding coverage rather than building capacity," said the operator. "We are strong in our established market. Current mobile broadband coverage [is] 400 million Indians, [with] plans to reach 500 million Indians by March 2017."
Idea has rolled out more than 70,000 cell sites in the last two years and plans to deploy more than 35,000 sites in the current financial year.
The company sees huge potential to attract customers in rural areas and among the so-called "Generation Z" and "Millennials" segments. In response to RJio's launch of apps such as Jio Chat and Jio Beats, it plans to introduce its own line-up of music and messaging apps in the fourth quarter, including Idea Chat, Idea Music Lounge and Idea Music Studio.
But is Idea too late to the game? RJio is not the only operator to have moved into this area. Airtel also offers a range of similar services, such as Hike and Wynk. Idea might be able to find differentiation through other services it is planning, including Idea Idea TV, Idea News and Magazines and Idea Storage. It also intends to ramp up its mobile wallet service, Idea Money, which currently has 3.4 million customers.
Moreover, nearly 800 million Indians have yet to go online, representing a major growth opportunity for Idea. Most of these users are from rural communities where reliance on mobile technology is perhaps even greater than in India's cities.
The question is whether Idea is in the best position to address this demand. It has yet to make a big commitment to 4G technology, having instead chosen to focus on 3G rollout. As rivals extend their 4G networks, this decision could leave Idea on the backfoot.
Coming up for air
What's more, Idea is not on a strong footing where spectrum is concerned. The company has 4G spectrum in just ten circles (out of total of 22 circles, or service areas). In comparison, Bharti Airtel and RJio have a pan-India presence. RJio's entry into the market could force Idea to bid aggressively in auctions due to begin on October 1. But the high reserve price of the spectrum, and especially of 700MHz airwaves, means it will probably focus on the 1800MHz and 2300MHz frequency bands. Spectrum is up for sale across the 700MHz, 800MHz, 1800MHz, 2300MHz, 2500MHz and 2600MHz ranges. (See India Preps for Mega Spectrum Auction in September.)
Even if Idea is able to procure spectrum, cut-throat competition in the 4G market is likely to make return on investment a distant dream. Ultimately, Idea's best bet could be a merger with another player. RJio's arrival has already spurred consolidation in the market, with Reliance Communications Ltd. buying Sistema Shyam TeleServices Ltd. and Airtel acquiring spectrum from Aircel Ltd. and Videocon Telecommunications Ltd. Rumors are rife that Idea could eventually combine with Vodafone. (See Vodafone, Idea Exploring Merger – Report.)
— Gagandeep Kaur, contributing editor, special to Light Reading