Reliance Jio is walking all over the little guys

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Somewhat surprisingly — even as Mukesh Ambani’s enormous outlay and giveaways on his telecoms venture Reliance Jio crushes margins — the other top Indian telecom companies are still adding users at a decent pace.

The same is definitely not true for the smaller Indian telecom companies which, by popular narrative, are just waiting to be folded into the victors of this rather vicious war.

From CLSA:

Amidst Jio’s free offers, top operators’ net adds up 12% YoY India mobile subscriber additions in 2HFY17 jumped over 3x led by Reliance Jio’s offer of free services. However, in a surprise, despite Jio’s 93m additions, top-3 incumbents – Bharti Airtel, Vodafone and Idea Cellular – reported a 12% YoY increase in subscriber additions to 39m. Although smaller operators lost 15m subscribers in aggregate, high additions by both top-3 incumbents as well as Jio underline surge of multi-SIMs which coupled with rising share of inactive subscribers renders operator revenues/Arpu as key.

The charted version tells the tale somewhat more clearly, again from CLSA:

It’s easy to see why this was being fought in a winner-takes-all manner. Ambani has sunk $30bn into his venture and has thrown so many offers to entice users that margins for other players have shrunk while the telecoms regulator has jumped in with (very contestable) charges of predatory pricing. Jio is shoving money out there because of the benefits that accrue to the top-player in a given telecoms market. It very clearly pays to come out on top. Take these charts from Crisil earlier this week — in a report entitled For telcos, market leadership is worth bleeding for — as a demonstration:

And for Jio, in order to recoup that $30bn investment, it really needs to come out near the top. Not that it can’t sustain losses for

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About David Keohane