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Freebies from Reliance Jio hasten Indian mobile consolidation

Freebies from Reliance Jio hasten Indian mobile consolidation

New entrant Reliance Jio has changed the economics of the mobile market

India’s largest operator, Bharti Airtel,  is to acquire the Indian mobile business of Norwegian carrier Telenor, in an apparent move to counter the impact of disruptive pricing by new entrant Reliance Jio Infocomm.

The deal is the latest among carriers aiming to consolidate their operations in India. Vodafone Group confirmed recently that it was in talks with Indian operator Idea Cellular for a merger, while earlier Reliance Communications entered into an agreement in September to merge its wireless business with Aircel, a smaller mobile operator.

The consolidation could help users as larger companies will be able to use spectrum more efficiently and invest in new technologies quickly, according to analysts.

A unit of the large Reliance Industries with deep pockets, Jio upset the plans of entrenched rivals by offering 4G services free for close to six months, garnering 100 million customers in the bargain.

The company, which plans to start charging from April 1, has indicated it will continue to undercut its rivals.

The competition from Jio has led companies to rethink their strategies, but there are also other factors at play in the consolidation, said Amresh Nandan, research director at Gartner. There were far too many players in the market and they were holding chunks of spectrum that they were not using efficiently, he added.

A number of companies were also not able to make the large investments required in new technologies like 4G and convergence and may have looked at an exit instead, Nandan said.

A deal with Telenor will give Airtel, with over 269 million subscribers, access to the Norwegian company’s running operations in seven service areas across six Indian states, apart from boosting Airtel’s spectrum in the seven areas by the addition of 43.4MHz in the 1800 MHz band. Telenor India has about 44 million subscribers.

Jio’s winning streak so far may begin to slow down after it starts charging, as customers will start looking for value for their money from the service, Nandan said. In the long term it is better for the consumer to have an industry where there is no predatory pricing but instead well-capitalized companies compete and innovate, he added.

Every time a player enters with predatory pricing it may appear to help customers in the short term, but it is not the best thing for the industry and the consumer, Nandan said.

India had 1.1 billion mobile subscribers at the end of December, according to data from the Telecom Regulatory Authority of India. It added nearly 28 million new subscribers in that month.

The financial terms of the deal between Airtel and Telenor, which is expected to close within 12 months, were not disclosed.

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