Reliance / RIL LTE / 4G the $8Bn Project has sent feelers that it will disrupt the Indian Data / Broadband services market with mere Rs 10 / GB tariffs when rolled out next year. But will this disrupt the Voice Telephony ?
RIL’s LTE / 4G Strategy – RIL will focus on data and offer cheap (or free) voice calls on VoIP technology as a loss leader strategy to build a subscriber base. RIL would be better placed than the incumbents to offer higher data speeds, which it is likely to leverage to drive down data pricing. In addition, this would significantly impact the voice revenues of the incumbents.
While RIL can offer on-net calls for FREE, off-net calls will need to be priced at a minimum of the termination charge [unless the call termination charge drops down to Zero by 2014 as highlighted by TRAI]. As for VoIP calls, we note that they are not costless. Hence we would surprised if RIL elects to provide free voice calls for an extended period. Additionally, Voice over LTE has its own limitations which will restrain the company from entering into pure-play Mobile Voice Services with a low cost LTE Phone.
RIL’s 4G Launch – No Impact – In 2003, RIL entered the market with disruptive voice pricing, which quickly helped build operating scale and volume of minutes. Competitors realized this and quickly moved a step ahead to build the Minutes factory model. Mukesh Ambani’s ability to succeed with a similar approach this time is limited because the headroom to cut prices is low and incumbents are strong enough with willingness to sacrifice margins to remain competitive in the market.
Thus, in my opinion Reliance LTE / 4G can only disrupt the business case of Data /Broadband Services of incumbents in India, which at the most will constitute 20% of Telecom Operators Topline by 2015.
Will Mukesh Ambani’s Telecom marathon stop here? No!!! Mukesh will BUY or Merge the RIL / LTE Infotel Broadband with some other 2G Mobile Service Operator to get his share of Voice 🙂 The next series of Articles will analyze the possible Mergers & Acquisitions in Indian Telecom industry as per the current rules of M&A highlighted in NTP-11 and TRAI recommendations.
How Reliance Can Offer Voice Services with Current Regulations ?
To start offering voice services it has to purchase a UASL license for US$400 mn (as clarified by DoT).
The only constraint would be the poor economics of spectrum for voice services (2.3GHz covers a lot lower area than 900MHz/1800MHz/2.1GHz of 2G/3G operators). However, with intracircle roaming now possible as per regulations, even this constraint can be bypassed by BWA operators by entering into roaming deals with 2G operators with spare capacity.
BWA operators could thus use underlying 2G networks of existing operators, and overlay voice+high-speed wireless broadband services at specific points with their BWA spectrum.
From my point of view it is not possible for any mobile operator to disrupt the Indian mobile market because in a 3g service the customer base is quite impressive for every mobile operators for different mobile territory throughout India. 4g is the higher version of 2g / 3g and not many people can afford this due to poor economy. Though Indian market is progressive with 2g and 3g service. But it is totally depends upon the mobile service provider how he is providing the service to its potential customers.