Bharti Airtel chairman Sunil Mittal has several reasons to believe that free calls and data offers from Reliance Jio have started hitting the Indian telecom industry.
The Indian telecom service industry is already facing huge pressure due the ongoing currency crisis that started from November 2016. Jio started offering free voice and data services from September 2016 – adding fuel to stagnating revenues.
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Riding on the free voice and data offers, Reliance Jio Infocomm’s mobile subscriber base is set to cross 100 million by March 2017 end in line with its targets. Bharti Airtel, the main rival of Jio, has nearly 260 million customers in India.
The only hope is that operators such as Bharti Airtel, Vodafone and Idea Cellular are not losing mobile subscribers to Reliance Jio at presence. Reliance Communications and Tata Docomo lost customers in the recent months.
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Bharti Airtel chairman Sunil Mittal on Thursday said that impact of Reliance Jio’s offer on Airtel is least compared to that on other companies in the market.
“It has its impact but compared to impact on companies in the market, Airtel is least impacted because of our 4G rollout, distribution reach. Our management is devoted and we have least market share or traffic share loss,” Mittal said.
Sunil Mittal also said Reliance Jio’s free offer is hitting the telecom sector adversely and has created unfair competition in the market, PTI reports.
The telecom operator community believes that Reliance Jio will extend its offers – may not be more freebies – beyond March 31. The extension of freebies from Reliance Jio will create serious crisis for Indian telecom operators.
Fitch Ratings, a leading credit rating agency, views the outlook for the entire telecom sector in India as negative for 2017.
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Mukesh Ambani, the promoter of Reliance Jio, does not have a strong strategy besides free offers to attract customers. The ARPU of Indian mobile users is around 200 per month. Indian mobile users are not keen to shift to a new operator because they are not finding enough reasons for a quick shift in loyalty.
Fitch Ratings believes that mobile data tariff in India will drop by 15-20 percent due to competitive intensity coming along from Jio. “But Airtel is a well established and entrenched incumbent in this market. Airtel with lot of spectrum asset on 900 MHz is well placed to compete against Jio,” said Nitin Soni, director at Fitch Ratings.
Some analysts believe that the 4G subscriber base of Jio may shrink once the telecom operator starts charging its customers.
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“So as long as it is free, even a customer who is a customer of Airtel or Idea will still take a free Jio SIM to enjoy free services for the next three months. But I think there will be some churn when Jio will start charging from April 1 and that churn may well reduce the subscriber base by 5-10 percent,” Nitin Soni said.
Sunil Mittal and other promoters of Indian telecom operators are eager to stop Jio from spreading its wings with free offers.
“There is a problem. Any big thing if given for free or at less price then it becomes very difficult to compete with. It is unfair competition which is being discussed through you (media) and in courts,” Sunil Mittal said.
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Airtel has filed petition against extension of Reliance Jio free 4G service beyond December. In its 25-page petition before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), Airtel had asked TDSAT to direct Telecom Regulatory Authority of India (TRAI) to ensure Jio does not provide its free voice and data plan beyond 3 December.
Airtel, in the petition, had alleged that TRAI in its decision dated 20 October erroneously concluded that since Jio’s promotional offer of free services was only valid till 3 December, it is consistent with the direction for 90 days.
“When something is given for free then that impacts market. We are now before TDSAT to say that the free offer is creating problem in the sector. Ultimately, there should be 4-5 companies in this country for competition. If you give anything for free that creates problem for which we are at doorstep of TDSAT and TRAI is examining it,” Mittal said.
Airtel in its second affidavit before TDSAT has alleged that the regulator is “perpetuating illegality” by allowing the Mukesh Ambani-controlled Jio to continue offer free 4G mobile broadband and voice calling service.
Telecom operators are finding it tough to compete with Mukesh Ambani’s financial power. Jio is making $20 billion investment in mobile data infrastructure for a pan-India 4G presence. Existing telecom operators do not have a wide 4G presence in India.
