The broadband arm of Reliance Industries is likely to start its operations with offers that will shake up the existing industry norms and quickly get a 10th of the subscriber base and nearly as much share of the revenues, says a report by Bernstein Research.
“We expect Reliance Jio will launch disruptive offers that stall key competitors’ growth and dampen existing market expectations,” the report said, in what appears to be suggestion that consumers will gain much from the impending competition.
It said the entry of Reliance Jio was one of the biggest controversies in the Indian telecom space. “For a market where competitive pressures are finally starting to ease, the spectre of a new and well-funded entrant is worrying.”
Coined by Harvard Business School professor Clayton M.Christensen, disruptive technology is described as one that displaces something already well-established and shakes up the industry with products and services that create a completely new industry.
An example: The computer displacing the typewriter.
Jio will be launching services with a new technology promising significantly faster data speeds than existing 3G services. “We believe an organic strategy could yield about 10 percent subscriber and 9 percent revenue share over 10 years,” the report said.
“While any aggressive action is likely to impact all players, Bharti is well positioned with its own 4G spectrum to ‘match’ any offer,” it said.
“Vodafone may need to scramble to accelerate their 4G network deployments but should eventually be able to follow in the higher-value metro circles; although it is lacking in spectrum in the others,” it said.
“We expect Jio’s entry to be disruptive. Having spent $13 billion on building a network, Jio needs to get to scale in order to move to cashflow positive operations,” the report said.
A disruptive entry, bringing down market expectations (and pricing), as well as relaxation of spectrum trading/sharing rules, could be catalysts for greater mergers and acquisitions, the report explained.
“We expect both Bharti and Vodafone to accelerate their data propositions in response – deploying more 4G and matching Jio’s data pricing model while playing up their superior voice coverage and quality. In the long-run consolidation should result in a better market structure for the remaining scale players — Bharti, Vodafone and Jio.
“We are less optimistic regarding Idea Cellular’s ability to adapt and compete in this environment and advise investors to reduce their holdings,” it said.
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