The Many Disruptions of the Indian Telecom Sector

The Disruptive Entry of Reliance Jio

The Indian Telecom sector has been severely disrupted by the entry of the conglomerate, Reliance, through its offering Reliance Jio. As if the sector was not already reeling under the combined impact of a brutal price war between the incumbents, Airtel, Vodafone, Idea, and Aircel, there is now the added aspect of intense competition engendered by the launch of Jio.

Indeed, it can be said without any hyperbole that Reliance has changed the game very much with its offering of free voice and discounted data packs along with its provision of a “basket of services” complementing and supplementing the base mobile and Smartphone telephony. What more, it is also offering handsets as part of “bundled services” wherein users can have the device as well as the service.

Longer Term Sustainability is a Concern

Having said that, it must also be noted that while Reliance is pumping and has already pumped close to Two Billion Dollars on its venture, it is also taking on the risk of “disruption with discounts” which might not be feasible over the longer term. Indeed, its plan is to sign up as many subscribers as possible so that higher volumes can make up for wafer thin margins.

It has succeeded in part in this strategy as can be seen from the acquisition of close to Two Hundred Million new subscribers. However, it remains to be seen as to whether these customers would stick with it once the initial euphoria generated by the provision of freebies subsides and the subsidies are over.

The Historical Record of Disruptions in the Indian Telecom Sector

Historically, the Indian Telecom sector has always been disrupting itself in the same manner in which the Global Telecom Sector faces renewed bouts of periodic disruption due to the emergence of new technologies.

Indeed, in a time frame of less than a generation, the Global Telecom Sector has gone from providing basic mobile telephony with the bare minimum services to the advent of the Smartphone revolution concomitant with the rollout of Successive Generations of Wireless technologies.

For instance, when the Second Generation of wireless technology or 2G as it is known was launched, many expected that this would last for a few years before the next generation emerges. However, 2G quickly turned into 3G and was followed by 4G which is now being upended by a possible 5G rollout in the next few years.

With all these trends, it is hard for Telecom Providers to keep pace with so many changes and that too in such a short time frame which entails them to upgrade their infrastructure and technologies constantly. Thus, it can be said that the Global Telecom sector is a place where “change is the only constant”, and this is a reality that all Telecom Majors worldwide have to keep in mind when developing and actualizing strategies.

Speeding Tiger and Lumbering Elephant

Moreover, the Global Telecom Sector is also threatened by obsolescence of the hardware wherein the constant release of Smartphone handsets with newer versions being released every few months makes it difficult for them to plan ahead for determining the compatibility and interoperability of the handsets with their infrastructure.

With so much happening so fast, it is no wonder that many experts liken the Global Telecom Sector to be a Tiger in search of its prey whereas the underlying foundation is like an Elephant that is lumbering slowly.

The Merger and Acquisition Mania

This has resulted in some industry incumbents to go on a merger and acquisition spree as their thinking is that unless they have the necessary financial muscle and the resources bandwidth (literally as well as metaphorically), they would be unable to maintain their operations.

In other words, the Global, as well as the Indian Telecom majors have concluded that they must be Financially Big to undertake the necessary investments as well as have the size in addition to having the resources or the physical bandwidth to add more virtual bandwidth.

Changing Governmental Policies

Talking about Bandwidth, the Indian Telecom sector has to deal with the added challenge of having to bid for expensive spectrum now and then and that too when such spectrum auctions are “tainted” by allegations of corruption and crony capitalism. Indeed, this is such a pervasive problem in India that many Global Telecom Majors often hesitate to enter the market.

In addition, they are also put off by the changing governmental regulations which sometimes take the form of “retroactively” changing the Tax Laws which regulate the Mergers and Acquisitions.

Indian Telecom Sector Remains Attractive

Having said that, it is also the case that the Indian Telecom Sector is one of the fastest growing sectors in the world with nearly a Billion consumers making up for a diverse but also a fragmented market where smart strategies can help them become market majors.

Moreover, with the Chinese Telecom Sector stagnating with all the capacity having been “absorbed”, Global Telecom Majors view India as the Next Frontier in their “Great Game”.

This is the reason why many Telecom Multinationals, as well as Smartphone makers such as Apple, are keen to set-up base in India and with the current business-friendly government; they are also attracted by the possibility of rebates and favourable laws.

Moreover, the government with its Make in India Policy is also encouraging them in this regard and hence, it would be fair to say that despite the many disruptions, the Indian Telecom Sector remains an attractive market which is like a Cheetah waiting to take off and record galloping rates of growth.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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