The spectrum auctions held recently and the ones held over the past five years have placed huge financial pressure on the telecom industry and on individual operators. Collectively, over $40 billion has been spent on spectrum by Indian telecom players since 2010, more than 1.5 times this year’s predicted industry revenue.
Most of those who have stayed the course have done so because of the long-term promise of being in a stable, mature market where they are able to offer a distinct service which their customers value. And, of course, that this market happens to be the world’s second-largest in terms of subscribers, and one of the ten largest by revenues.
As Indian telecoms have moved well past the 50 percent-plus real people penetration, this market maturity is now approaching rapidly and it is beginning to become evident what the end-game may look like for each player. I still believe that we will have around 5-6 players competing in each circle in India once there is consolidation in the market, as expected. With this stabilisation, we can also expect the emergence of a rather varied set of players, each offering a slightly different set of features to its users. After years, where services were similar, finally, we are seeing the arrival of choice for the Indian customer.
Here is my hypothesis on what the market may look like in the years to come:
- Five-six players nationally: Three “national” players with operations in 20+ circles and 2-3 additional players in each circle, but with operations in around 10 circles each.
- Three full-service players who offer the total gamete of voice, data, consumer and enterprise services, pre- and post-paid, as well as options to bundle with fixed services at home or office and possibly TV and entertainment. These will all be relatively pricier options where per minute mobile rates work out higher, but offer better quality of service with more networks on 900 MHz and HD voice, seamless roaming on the same network across India and overseas deals.
- The big three will be distinct among each other with differences in terms of cities’ coverage, branding and retail experience, and specific themes around international/youth/small city/smartphone.
- Two-three focussed players in each circle, offering either a specialised data service or an economical voice service.
- Firstly, there will be the relatively cheaper options where calling rates are lower, quality of service is adequate, not all Indian circles are covered on the same network, and offer only pre-paid SIMs and which work in India alone–the services will, however, be popular with smartphone users who like messaging apps and Viber to call relatives overseas.
- Secondly, there will be a data specialist option which targets tablet users who prefer internet access, YouTube and apps more than voice, and whose usage may be more stationary and wireless data, and less on the move and voice. The service may be bundled with entertainment services at home, and may appeal to youth, students, families and professionals who prefer an additional data-specialist connection in addition to another mobile connection.
I would expect Airtel, Vodafone and Idea to remain the big three since they have now done enough to create daylight in market share between them and the rest. I expect RCom to gradually move to the smaller category where it will join the likes of Uninor, Aircel and Tata Teleservices. Reliance Jio can be expected to be the data player. Overall, I would expect some consolidation along with circle/market exits.
It will be interesting to see which of the players in the market will embrace the digital opportunity that is available in India today, especially in the enterprise market where many industries are likely to start deploying digital technologies to make their businesses more efficient. If an operator takes this route to innovate and create new value outside the traditional telecoms business, it may spark a new range of acquisitions by telcos of software, applications and cloud related businesses.