Rel Jio’s disruptive moves may force rivals to tweak biz model, but may not dent their markets much

The unleashing of competitive pressure on Friday by Mukesh Ambani-owned Reliance Jio Infocomm Ltd (RJIL) on its bigger rivals – Bharti Airtel and Vodafone-Idea Cellular combine – is going to see them adjusting their business model to protect their market but may not result in a largescale exodus of subscribers to Rel Jio.

Rajan Mathews, director general of Cellular Operators Association of India, believes Jio was acting in accordance to the “DNA of an Ambani company”.

“It’s always been in the DNA of an Ambani company to do big scale/scope dominating-type of moves in the industry they play (in). Once they have decided to come into the telecom space, they’ve got to do it in a big way, in an aggressive way. That’s exactly what we are seeing. They have, obviously, very carefully calibrated their go-to market strategy. It’s certainly going to put pressure on other operators but the whole market will soon adjust to these new dynamics,” he said.  According to him, till now the disruptive actions by the telecom venture of Ambani had resulted in losses to weaker players like Videocon, Telenor, state-owned BSNL and others.

Mathews said Jio’s latest move could see “well-heeled” players like Airtel and Voda-Idea responding “substantially” to it.

“I don’t think they (stronger rivals) will sit back and allow the loss of customers. They will be very aggressive. Of course, there will be some pain in terms of financial condition but these are all long term players. I don’t think they are going to just allow Jio to have a cakewalk. They are going to be very aggressive on these matters,” said industry lobby head.

A telecom expert with a leading consulting firm, who spoke on condition of anonymity, said he was surprised that it has taken Jio so long to come out with affordable fourth generation (4G) feature phone to tap volume in the telecom space.

“India has not more than 300 million smart phones. Launch of the feature phone is realisation you need to be in all segments to be viable in India. You need to have yourself identified with numbers and have something which allows you to be in lowest segment of the market,” he said.  

According to him, studies reveal that till 2025 voice will remain a major reason for people to own a phone. “The launch of (Jio) phones is the recognition of that reality and the need to expand beyond the 80 million subscribers (active users of Jio)”.

He said that with a cash and cash equivalent of over Rs 70,000 crore on its books, Jio had the financial muscle to intensify competitive pressure on its rivals.

However, the telecom expert cautioned that a monopolistic situation would not be favourable for the consumers and said the government must to ensure the viability of other players to maintain a balance in the industry.

“What you don’t want from the consumer perspective is for one player to survive. The government needs to ensure that other two players (Airtel and Voda-Idea) remain viable otherwise we will have a monopoly situation very quickly,”

Interestingly, despite the attractive offer by Jio most experts do not expect large scale exodus to it from other operators.

Krishna Kumar, a Bengaluru-based telecom expert, said the high-end consumers in metros may not easily shift to Rel Jio.

If at all, he said, Jio may make a dent in the tier-II and tier-III markets.

“At least, in the metros, I don’t see many people moving out of Airtel or Voda-Idea to Jio. I haven’t found even 1%, who have moved out to Jio (till now).  I don’t think it (Jio’s offer) is earth-shaking, for sure. They had to come out with something to keep the buzz alive. And that is what they are doing,” he said.