High pitched battle against RJio or pre-launch jitters?

Many analysts and industry observers are seeing a deep sense of insecurity playing up in the way GSM players' lobby body Cellular Operators Association of India (COAI) is escalating its fight with Reliance Jio Infocomm Limited (RJIL), which is yet to commercially launch its services. Last week, the industry body unleashed a barrage of accusations against Telecom Regulatory Authority of India (Trai) and Rel Jio, alleging that the telecom watchdog's decisions and discussion papers were tilted in favour of the new entrants (read RJio) and that the Mukesh Ambani-owned telecom company was passing off "full-fledged services" as test services.

"It is very obvious that these guys (incumbents) are getting jittery about Rel Jio's entry into the market. It (commercial launch of RJio's services) is going to trigger intense competition in the mobile data market just like what happened in 2002 in the voice segment when Reliance offered hugely discounted tariff," said G Krishna Kumar, Bangalore-based telecom executive. 

In 2002, Reliance started a stiff tariff feud when it offered voice calls at 50 paise per minute while the prevailing rate in the market was somewhere around Rs 2 per minute. This had led to other players slashing their prices to retain their market share.

Something similar could replay with RJio preparing to launch it fourth generation (4G), long-term evolution (LTE) and voice over LTE (VoLTE) services soon. Existing players have already significantly dropped their tariff rates in anticipation of RJIL's commercial launch. Currently, the RJio's services are in test mode. It began offering free services to employees and their family and friends in December last year and started its test trial for the general public in March-April, which will go on till the end of this month. Lately, existing players have seen their data revenues falling even as volumes have shot up.

"These powerful players (Bharti Airtel, Vodafone and Idea Cellular) control around 65% of the market. For the first time, they have someone (RJio) who can match their might and take them on. They are worried about how things will shape out," said an industry observer, who did not want to be named. He said the legacy players have always had the hold over telecom tariff and now with a strong player entering the market they might lose that control over it. "If you look at their behaviour, whenever they have faced competition, they have pushed down the prices and when rivalry has eased, they have again raised them. Between 2008-2012, the tariffs were brought down but after telecom licenses (2012) were cancelled, they started climbing up again. Now, with Reliance coming in, data services rates are being cut again," said the telecom expert.

Another expert refrained from calling large telecom players' reaction as "jitters" but emphasised the fact Reliance was a player with "tremendous might". "I wouldn't call it jitters but the way things are progressing, there is cause for worry for the old players. Reliance has an edge over them with brand new networks and latest technology that will make it a competitive and efficient player in the market. The incumbents, on the other hand, have legacy network and technology, which could work against them. In my view, coverage and quality of service will be the clinching factor in who wins the race," he said.

The incumbents, through their association, have alleged that RJio, which has already reached a subscriber base of 1.5 million in its beta phase, was poaching their users by offering Mobile Number Portability (MNP) to them. They have refused to augment the interconnect capacity at their points of interconnection (PoI) for the Ambani-owned telco saying call coming from its network was choking their resources. This, RJio said, was hurting the quality of its service with 65% of their users' calls failing to get through on networks of legacy players. An RJIL spokesperson said their user base was too small to choke the networks of the existing players. He said if its 1.5 million subscribers were to be split between the 22 telecom circles, then it would come to around 70,000 per circle. And, if it were to be further broken down to city-level consumers, it would be an even lower number of around 300-500 users.

"I don't think such a minuscule number of users can choke their (incumbents) network," he said. The RJIL executive also said it was not breaching any norm by offering "voluntary" MNP to competitors' subscribers. According to him, RJIL is ready with a network of over eight lakh LTE remote radio heads (RRHs). As per a letter to TRAI chairman RS Sharma last week, the company is projecting a user-base of 100 million in the first year of its launch, which is almost 9% of the current market. With such aggressive growth guidance by the new kid on the block with a past record of violently shaking the market, it is no wonder that the existing players are sharpening their arsenals for the bloodbath ahead.