The Indian telecom industry has undergone a massive transformation in the last few years. It all started in 2016 (publicly available) when Reliance Jio entered India and disrupted the telecom sector with its ‘free data’ and ‘unlimited voice calls’. Following Jio’s strategy, other key telcos like Airtel and Vodafone (now Vodafone-Idea) started offering more data, unlimited voice calling facilities and more. And all of it at dirt-cheap prices.
These ‘free’ and ‘unlimited’ offerings have pushed most Indians to use the Internet and get online today. According to a report by the Internet and Mobile Association of India (IAMAI), as of September 2019 India had 451 million monthly active internet users. Only China has more.
Until the beginning of 2019, the growth graph of the Indian telecom sector was moving up the ladder, but there was some turbulence in the second half of the year. The introduction of the Interconnect Usage Charges (IUC) and the resultant tariff hikes created some turmoil. Also, this year saw the merger of BSNL and MTNL as well as Vodafone and Idea in a bid to survive in the competitive telecom space.
As 2020 approaches, let’s rewind and take a look at how 2019 unfolded for the India telecom industry.
One of the first major things that happened this year is the merger of the two ailing state-owned telecom operators: Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL).
After months of discussion and analysis, the Indian government approved the merger of BSNL-MTNL in late-October. Telecom Minister Ravi Shankar Prasad confirmed the merger process will “likely be completed in 18 to 24 months”. The Indian government has revealed that until the merger is completed MTNL will operate as a subsidiary of BSNL.
With the merger announcement, the cabinet also announced a revival plan for both BSNL and MTNL. The government said it will put Rs 29,937 crore for revival of the two telecom operators while their assets that are worth Rs 38,000 crore (approx) would be monetised. In addition, Prasad also said that the government plans to raise a sovereign bond of Rs 15,000 crore for their revival. The cabinet also gave a nod to allocate 4G spectrum to BSNL so the company could provide broadband and other data services similar to competitors like Jio and Airtel.
As a part of the merger, the government announced a Voluntary retirement scheme (VRS) plan for employees of both the telecom companies. BSNL and MTNL recently informed that around 92,700 of its employees have opted for voluntary retirement, which is said to save almost Rs 8,800 crore (approx) yearly in salary bills for the debt-laden telecom operators.
The discussion around Vodafone and Idea Cellular merging have been on for a long time now but it came into effect only this year. In August, the completion of Vodafone India and Idea Cellular merger and formation of Vodafone Idea was announced. The two companies decided to merge their business after the Indian telecom industry witnessed a huge tariff war with the entry of Jio followed by other telcos going aggressive with the offerings and pricing of their tariff plans. The key idea behind the merger of Vodafone and Idea was to improve the network and offer customers a better experience.
The merger helped Vodafone Idea beat Reliance Jio and Airtel to become India’s largest telecom company with 408 million active subscribers and revenue market share of 32.2 per cent.
Vodafone-Idea and Airtel suffer record losses
This year telecom operators like Vodafone-Idea and Bharti Airtel suffered one of the biggest losses of all times. In 2019, Vodafone-Idea reported a record loss of Rs 50,921 crore for the September quarter. The loss this year widened from Rs 4,874 crore in 2018. In addition, Airtel also reported Rs 23,045 crore in the September quarter from a profit of Rs 118 crore in 2018. Among the key telecom players, Reliance Jio is the only telecom operator that reported a profitable quarter with net profit up by 45 per cent YoY.
New tariff plans announced
India has for long been one of the cheapest telecom markets in the world. However, this year, the party which started with the launch of Jio services in 2015 ended for the consumers. For the first time in five years, Reliance Jio, Airtel and Vodafone increased the price of their prepaid plans with the hope to improve the overall financial state of the telecom industry.
According to analysts, hiking the price of tariff plans will help these telecom operators increase their respective average revenue per users (ARPUs) but will definitely impact overall data consumption, which has been rising with every passing year mainly due to the dirt-cheap tariff plans and unlimited benefits.
Reliance Jio, Airtel and Vodafone-Idea launched some new tariff plans and increased the price of some of the existing plans. The new All-in-One Jio plans now start at a slightly higher price of Rs 149 and go up to Rs 2020. Even in the new tariff plans, Jio mostly offers low-priced plans when compared to the competition. However, unlike Airtel and Vodafone-Idea, Reliance Jio doesn’t offer unlimited voice calls to other operators. As per TRAI’s order, Jio has set a cap for voice calls to other networks.
Talking about price hike of tariffs in India this year Neil Shah, Partner at Counterpoint Research tells indianexpress.com that “Cheaper Unlimited 4G plans hooked mobile users to internet, consuming more content, drive e-commerce and richer communication. This drove the data consumption from average 800MB in 2015 to 8GB per month per user in 2019. As the users warm up to consuming more data in 4G era at cheaper price points, operators will look to drum up higher ARPU to cash in on consumers’ growing internet dependence. They would do this by offering unlimited plans but tiered by speeds in pre-5G to 5G era transition. The mature data users will end up upgrading to higher speeds for better experience thereby boosting the ARPU.
“Another strategy would be to bundle multiple services from fiber broadband, streaming content, smart home and other apps, thereby offering greater value proposition allowing them to raise the ARPU,” adds Shah.
TRAI defers Zero-IUC regime
A couple of months ago, Telecom Regulatory Authority of India (TRAI) announced that all tariff plans across all operators will come with interconnection usage charges (IUC) until January 2021. The order was implemented in the new plans announced by Jio, Airtel and Vodafone-Idea.
Initially, all three telecom operators included a limit to calls to other networks, after which the users were required to pay 6 paisa per minute. Some days later, after users opposed IUC, Airtel and Vodafone removed the cap on free and unlimited outgoing calls, but Jio kept the FUP limit as it is. Airtel and Vodafone were able to remove IUC as their plans are slightly expensive compared to Jio.
New MNP rules
With the rising price of tariff plans, consumers are thinking to switch to telecom operators that offer better value for money. In order to make the process of switching between networks easy and simple, TRAI implemented new mobile number portability (MNP) rules earlier this month. The new MNP rules allow users to port to a new telecom operator in just two days, which is much less than the earlier 96 hours.
The new MNP rules are in effect starting December 16. In the new MNP process, a Unique Porting Code (UPC) is generated when the subscriber is eligible to port the number. Notably, UPC will be valid for only four days for all the Licensed Service Areas except for Jammu & Kashmir, Assam and North East region, where it’ll be valid for the next 30 days.
The new MNP comes with some conditions like: postpaid users should ensure clearance of ‘outstanding dues’ towards the existing service provider, no pending contractual obligation(s) to be fulfilled by the subscriber, among others.
To improve voice calling experience, especially in indoors, telecom operators are now bringing Wi-Fi calling. Airtel has already announced Wi-Fi calling service in some circles including Mumbai, Delhi NCR, Karnataka, among others. The remaining circles are expected to get the service in the days to come. Following Airtel is Jio. Reliance Jio is currently testing the Wi-Fi service. Previously a report coming from TelecomTalk website suggested that Jio has started testing the service in other areas like Kolkata, Karnataka, and Kerala.
Using Wi-Fi calling…
At indianexpress.com we have found that Jio has started testing the service in Delhi NCR area. Testing Jio Wi-Fi calling in Noida we discovered that the service works seamlessly. Turning off the Wi-Fi calling service when at home (with patchy network) resulted in call drop but activating Wi-Fi calling option improved the calling experience.
Interestingly, we connected the Jio Wi-Fi with Airtel Xtream broadband and it works very well. This means, unlike Airtel, Jio’s Wi-Fi calling service will be compatible with other broadband services. Airtel Wi-Fi calling currently works only with Airtel Xtream. However, the company has confirmed that they are working to expand the service to other broadband services as well.
5G is the future
5G, the next big thing in the telecom industry, is already available in some countries. It is expected that 2020 will be all about 5G and its deployment in the Indian telecom industry. Companies like Reliance Jio, Airtel and Vodafone-Idea are reportedly already testing 5G in the country. Doug Suttles, CEO and Co-Founder at Ookla tells indianexpress.com that there’s a lot that remains to be seen when it comes to India’s 5G rollout. “India’s auction for 5G spectrum is set for the first part of next year and thus far operators have communicated varied approaches to eventual network deployments. While Jio prepares to launch 5G services in 2020, Vodafone and Airtel appear to be keeping their focus on 4G in the midst of regulatory and infrastructure considerations. One thing is sure — the transition will likely happen over an extended period of time,” he says.
Providing some insights about what the telecom operators are expected to do in terms of 5G next year, Shah from Counterpoint Research tells indianexpress.com, “5G development will commence in second half of next year in a bigger way especially via Jio. Jio is in a much better position with its 4G only network to start the upgrade path to 5G network. The lower cost per bit in 5G and plethora of opportunities it offers beyond mobile is something which will prompt Jio to roll the 5G network earlier & faster compared to its rivals. We could see soft launch of 5G devices starting next Diwali if 5G spectrum availability is cleared.”
Overall, in 2019 the Indian telecom industry has seen some major ups and downs. The coming year is expected to be even more eventful for the telcos, mostly because it is said to be around 5G.
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