Indian Telecom sector is witnessing stiff competition of all time post Reliance Jio entry. Reliance Jio launched its sophisticated 4G network attached service. Reliance jio also launched LYF Smartphone brand to complete the ecosystem in order to create all in one platform. At the same time incumbent operator led by Airtel as they have presence across all service area changed gear from response to setting the rule of the game. Airtel recently launched data plan where user can get 10 GB data in 250 INR and taking the price offering per GB to INR 25 which is way lower to planned tariff plan of Reliance jio.
4G network is all IP network and potential TAM is only 550 MN whereas for incumbent service providers the TAM is 1.25 Bn as they also support devices which is called non data centric feature phone.
Reliance Jio is part of Reliance Industries. Currently Reliance Jio is offering all services free under welcome offer and finding that through the Petro money of Reliance Industries. Reliance jio invested more than $24 Bn on 4G network development which pushed Reliance industries from Net Cash to Net debt companies. Reliance jio needs to pay termination fee for all calls which is getting initiated from Reliance Jio and terminating at non Reliance Jio network. Effectively the move will be nothing but the cash burning to acquire userbase whereas Incumbent data userbase are mostly user I of 3G and only 25% of their users are on 4G network users. It will be easier for incumbent operators to go through the onslaught successfully through internal accural but at the same time it will impact on their profitability. Contrary to that Reliance Jio will take years to come to a situation when they can sustain their competitive environment through internal accural
It will be interesting to see how Reliance jio impacts the profitability of Reliance Industries and service on Petro money.
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