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Government and consumers to be the biggest beneficiaries of Reliance Jio’s 4G services
Manoj Gairola |  |  29 Aug 2016

It is a long wait. Telecom observers are waiting for Reliance Jio to launch its 4G services. The company won spectrum in an auction about six years ago, in 2010, and for last three years business journalists are speculating its launch date. At an investment of about $ 15 billion, it would be the costliest telecom start up in the world. It will also be the world’s first network offering VoLTE (Voice over LTE) on such a large scale. There is always risk involved when one launches new technology on such a large scale.

The biggest beneficiaries of its entry would be the consumers and the government. The consumers are obviously the first to benefit whenever a new big operator offers services. Competition always brings down prices. Moreover, the incumbent operators are forced to improve their services.

The government is another big beneficiary as Reliance Jio’s entry has ensured that its forthcoming spectrum auction would be successful. The incumbent Operators have no option but to acquire additional spectrum so that they can offer good quality telecom services – 2G, 3G and 4G.

About three years back, all the incumbent operators claimed that 4G was not required in India and 3G was sufficient to meet the data demand. They did not want to invest on 4G spectrum as the spectrum was no longer free and they had to pay for it. As Reliance Jio started rolling out network, the incumbent operators started realizing the significance of 4G. Being market leader, Bharti Airtel was first to react. It started acquiring spectrum from small operators. Today Bharti Airtel is the largest 4G operator in the country.

However, Reliance Jio’s entry will put pressure on existing Operators. They will have to invest on the infrastructure and on acquiring additional spectrum. When Aditya Birla group recently announced merger of its group firms Aditya Birla Nuvo Ltd (ABNL) and Grasim, there was speculation that the main reason for this restructuring is to financially support its telecom arm Idea Cellular during the spectrum auction and to fight Reliance Jio. The company has, of course, denied it. Later Idea cellular also denied its merger talks with Vodafone, though market sources say that the talks have taken place between the two incumbent Operators.

Singtel has consolidated its position in Bharti Telecom, holding company of Bharti Airtel by increasing its equity by 7.39 per cent. It has bought shares from Temasek. Bharti Airtel will also be required to bid aggressively for Spectrum and to continue its expansion of 4G services.

RCOM is already in the process of acquiring MTS and merging its mobile business with Aircel. It is basically a process of consolidation of Spectrum that would be offered to Reliance Jio.

In a nutshell, government and consumers are the biggest beneficiaries of Reliance Jio’s 4G services, incumbent operators will be under pressure, while Reliance may have taken a risk of offering voice only through VoLTE.

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29 Aug 2016(IST)  
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