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JIO on its way up; right up to the top!

Created on 27 Nov 2021

Wraps up in 6 Min

Read by 7.9k people

Updated on 12 Sep 2022

Once upon a time, an industry was flourishing, growing, and promising. It was known as Telecommunications. Like any other industry, it had pricing power, lots of competition, huge demand, and somewhat barriers to entry. 

But like every perfect story has a twist, telecom also had one. Something happened in the period 2010-2016 that the industry got destroyed; it lost its pricing power along with competition and nearly went downhill. 

If you are wondering what happened in that period, how such a thriving industry was destroyed, we must go back in time! So are you ready for Time Travel? Let’s go back to 2010!

2010

The year is 2010; we are obviously addicted to our phones. Half of us are enjoying 2G services the other half are waiting for 3G. Little did we know that a unique spectrum of “wireless broadband” is ready for an auction.

But just a month ago, 3G services were auctioned, and all the big telecom players such as TataDocomo, Airtel, Idea, Rcom, and S tel won the bidding. 

They are all set to launch 3G services in India; why would these giants be interested in the Wireless Broadband auction where voice calls are also unavailable. Naturally, the Wireless Broadband network is not a big deal!

Thus, Enter INFOTEL BROADBAND SERVICES LTD., which is interested in the auction. One of the rules to participate in the spectrum is to provide a bank guarantee of 2.5 crores; interestingly, the total net worth of Infotel is 2.5 Crores; you can guess how small this company is, right!

So, the big question is, which bank will take this risk to give this kind of guarantee to Infotel? The answer is Axis bank. 

Axis bank somehow gives the bank guarantee, and the company becomes eligible for the auction. Guess what happens next? Infotel Broadband Services Ltd. wins the auction. 

The biggest twist in the plot is, As soon as they win, Reliance Industries buys them! Nothing significant happens after that until 2013. So, ready for a Flash-forward to 2013?

2013

Two years have passed since Reliance Industries bought Infotel Broadband Services Ltd. This news is again in the limelight today as Reliance is changing the new company's name to JIO Infocom.

So, something’s cooking, and things are not as straightforward as it seems. This marked the year of allegations for Reliance. It’s alleged that Infotel was just a dummy company of RIL from the very beginning.

If RIL entered the auction, many buzzes would have been created, inflating the spectrum’s price. Thus, RIL used this dummy company. Also, why would a bank like Axis risk giving such a huge bank guarantee to such a small company?

Back in 2010, other big telecom companies were not interested in the spectrum as it was just like another dongle service, and voice calls were also not allowed.

TRAI clarified that the spectrum was for Wireless Broadband with NO voice call services. But to our surprise, this year government is taking a flip by allowing the voice call in the spectrum, making it a full-fledged telecom spectrum just with minimal migration fees; the migration fees are so minimal that the government will go through a loss of at least 20,000 cr.

The Telecom industry is shaken, and they collectively alleged that if they knew voice services would be available in the spectrum, they would have applied too. Time passed, and things got normal. But it was just the calm before the storm.

2016

Three years have passed, and today is 5th September 2016, something so unique is happening that it’s changing the overall picture of how we consume information. 

The Telecom industry is already shaken from top to bottom, India is on the verge of becoming the cheapest data provider in the world, and data consumers are the happiest people on the planet.

RELIANCE JIO is available to all! Data service is FREE!!!!

JIO’s welcome offers are such that it is taking the entire nation by storm. It’s giving 4g services for the first time in the country, local, and STD calls, all for free! All we have to do is buy a JIO sim.

Before Jio came into existence, the Telecom sector earned $25 billion in revenue, which fell to $18 billion from its free services.

You must think that only the richest guy in India can afford to do all this. But it’s not true; the reality is they got the spectrum pretty cheap. If other telecom companies would have got the spectrum at that cheap rate, they would have been able to bring these kinds of offers.

Even though we as consumers were getting free services, an entire industry was being destroyed. Moving forward, we will read how events unfolded since 2016!

How JIO destroyed an entire industry

Rest in Peace, Major Players!

Back in 2010, the key players in the telecom sector were BSNL, MTNL, Airtel, Rcom, Vodafone, Idea, Aircel, and Tata Docomo. Just take a look at the picture below, huge competition and multiple players. After JIO came into existence, MTS, Uninor, Aircel, Docomo, and more were completely wiped out.

Major Players in the Telecom sector till 2010-2016

 

Major players now

Although Vodafone, BSNL & Airtel remain the major players, all of them are under huge losses & debts, and obviously, JIO is the holder of a major market share of 37%.

The Merger & Transit Saga

Jio started to capture the maximum part of the market; a price war was started as it offered free services. The pricing power among the competitors was compromised. To fight this, Synergies came to play; customers of tata teleservices started merging with Airtel Network, and the latter also acquired Telenor. 

Idea & Vodafone, the 2nd & 3rd largest telecom players, decided to join hands. In 2018 they merged and formed a new entity called VI.

Still, the total market share remained low. Reliance Communications & Aircel also decided to merge even though this merger couldn’t take place. But the former merged with MTS. Also, the merger of BSNL-MTNL can also take place. A few operators wiped out, and the ones that didn’t wipe out merged.

The Game of Monopoly

Jio has already become India’s leading communication service provider. In a nutshell, the country had around 14 operators who have come down to sinking, lossmaking & debt-driven 4. 

Thus, we would call it an “ALMOST” monopoly situation. As far as future plans are concerned, the company aims to bring the most affordable 5g android phones. So, All eyes over Jio for next coming years too?

The Bottom Line

Data prices declined, Data users inclined! The subscriber base of Jio at the end of 2016 was around 720 lakhs which grew to 4390 lakhs in 2021.  Do you remember the days when, for 1GB mobile data, you used to pay around Rs. 255? Now, you will get 25GB of mobile data for the same price.

India is home to the world's cheapest mobile data services, as seen in the chart below.

Mobile data usage has increased drastically over the years since Jio came into existence. Cheap data combined with social media has given birth to a new age of influencers. 

Also, Government has come up with various initiatives like Digital India that will focus on improving the online infrastructure & internet connectivity of the country. For this Data has to remain Cheap. 

The telecom sector will revive or go downhill no one knows, but we know for a fact that it will never be the same as it was before 2016!

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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