Posted On December 27, 2016 By In Technology And 993 Views

Telecom wars to continue in 2017, consolidation seen

‘The era of paying for voice calls is ending,” RIL Chairman Mukesh Ambani had said while announcing the launch of Reliance Jio in September. While there was no dearth of action in the telecom sector during the year, which saw the biggest spectrum auction, the banning of Facebook’s Free Basics and the merger of Reliance Communication and Aircel, Mr. Ambani’s long-awaited entry into the segment turned out to be the most significant. The announcement sent the existing operators in a tizzy, triggering a full-fledged war between the incumbents and the new entrant. It also unleashed a fresh tariff war in the fiercely competitive sector. Telcos, including Bharti Airtel, Vodafone, Idea Cellular and BSNL, were forced to bring out similar offers to combat freebies offered by Jio, which were denting their revenues. “Reliance Jio demonstrated how a deep-pocketed player can impact the market across the country, even though it is a late entrant. However, it is yet to demonstrate significant market share or force a large movement of customers to Jio,” Mahesh Uppal, Director at consultancy firm Com First told.
The fight to grab a share of the booming telecom market, however, turned ugly over the issue of interconnect points. Reliance Jio had alleged that its subscribers were unable to make calls to other networks as other operators were not providing adequate interconnection points. On the other hand, existing telcos said that Reliance Jio’s “under preparedness” and “insufficient” testing efforts were to be blamed for network connectivity issues. Telecom regulator TRAI, which COAI had alleged was favouring Reliance Jio, and the Department of Telecom had to step in to broker peace between Jio and the existing operators. The regulator, in fact, proposed a heavy penalty of ₹3,050 crore on the top three telcos, Bharti Airtel, Vodafone and Idea for violating their licence agreement and for denial of interconnection to the new player.
Analysts expected the price war to continue in 2017, bringing data costs down by at least 15 per cent.
“at least 15 to 20 per cent decline in data tariffs, which could aid increase in data traffic by 50-60 per cent along with cheaper tariffs and availability of cheaper 4G-compatible phones. The industry will add at least 5-6 million smartphones each month, with the cheapest 4G phone costing only $45-60. However, strong traffic growth may not translate into revenue growth due to lower data tariffs,” according to Fitch Rating.


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