Indian telcos hope for recovery in 2018 after year of bruising competition
Major telecommunications operators in the second biggest Asian economy seek to boost revenue amid intense price wars
India's telecom sector will enter the new year completely transformed with the four remaining major operators looking to revive revenues to solidify their position in Asia's second-biggest economy.
The country's telecom industry has been through athough time this year, as intense competition has led to aggressive price wars, forcing some of the operators to merge and drove smaller players out of the market. Only four major companies now remain in a once over-crowded market and undoubtedly dominate the Indian telecom sector.
“The Indian telecom industry has seen lows in the past year due to wars for tariffs and data usage,” Dushyant Jani, the founder and chief executive of Mumbai-based Mobclixs Technologies says.
Reliance Industries, a conglomerate largely associated with oil businesses and controlled by India's richest man Mukesh Ambani, in September 2016 launched a new telecoms operator in India, Reliance Jio. This has transformed the landscape of the industry, with cheap data deals, extensive free trial offers and promises of free calls for life. Mr Ambani has described data as "the new oil”, as his company make a push to dominate the telecommunications sector.
“Due to the Jio effect, revenues of telecom firms have seen a considerable change. Mergers have been on the rise, but the entry of Jio [also] saw many telecom operators shut shop as well,” notes Mr Jani.
The four major firms that are now left in India are: Bharti-Airtel, Idea-Vodafone, public sector BSNL-MNTL, and Jio. Vodafone's India subsidiary and Idea in March announced that they were merging.
“The current scenario in the Indian telecom industry is very very volatile,” says Malik Gilani, the founder and chief executive of Esar Media and Advertising in Mumbai. “The disruption of the data revenue which has been caused by the inclusion of Jio [in the mix] has changed the balance sheets of operators.”
Telcos have seen sharp declines in profit and some of them even recorded losses this year. The telecom industry in India is expected to see a 5.3 per cent year-on-year decline in the gross revenues to 1.79 trillion rupees (US$28 billion) in the current financial year, which runs until the end of March 2018, according to JM Financial, an Indian financial services group. However, the firm forecasts a recovery in the next fiscal year, and projects that revenues could rise by 6.5 per cent, largely on account of fewer competitors in the market.
“We expect sequential revenue growth to begin from the January to March quarter, driven by the exit of smaller telcos, 4G price hikes and likely adoption of unlimited calling plans by 2G feature phone users,” says Sanjay Chawla, a telecom analyst at JM Financial Research.
Smaller telcos, which include Aircel, Tata Teleservices, and Reliance Communications, are expected to either merge or remain niche operators.
Thursday's long-awaited verdict on the 2G scam, one of India's biggest corporate scandal, in which the court in a surprise decision acquitted all the parties implicated in the case. The long running court battle is a reminder of the upheaval that the industry has been through over the last few years and of a time when there were too many operators in the market.
Those cleared in the graft case include a number of high profile corporate executives and political figures including the former telecoms minister A Raja, who were accused of colluding in the award of 2G telecoms spectrum licences in 2008, at prices below the market value in exchange for bribes.
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