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Last Updated : Feb 21, 2017 04:38 PM IST | Source: CNBC-TV18

Jio Prime offer to hasten telecom sector consolidation: Analyst

Mukesh Ambani continues to maintain a large amount of pressure on other telcom players, said Mahesh Uppal of Com First India. He expects further consolidation in market.

Although Reliance Jio will start charging for its services after March 31, the new offers where users will have to pay Rs 303 per month to continue enjoying unlimited data and calling (now to be called Jio Prime) comes as little relief for the incumbents, said Mahesh Uppal of Com First India.

Mukesh Ambani continues to maintain a large amount of pressure on other telcom players, he told CNBC-TV18 in an interview while reacting to a press conference where the RIL chief announced new tariff plans for Jio starting April 1.

Uppal said he expects further consolidation in the market.

The telecom sector has been abuzz with news of massive mergers to fight Reliance Jio's might. One is the merger of four relatively small telcos, namely Reliance Communications, Aircel, Tata Teleservices and MTS.

Idea Cellular and Vodafone are also planning to merge, creating India's biggest telecom company.

"Incumbents have been waiting for Jio to charge its subscribers. From here on, retention of existing customers for incumbents is going to be much easier as they try to bring attractive plans in par with Jio's," said Naveen Kulkarni of PhillipCapital.

However, he added that users will stick to incumbents only till they feel that Jio's services remain inferior to the others.

Uppal maintained that going ahead data will almost be free to customers. Customers may benefit greatly from this, but on a long term, the telecom companies will suffer the most and the sector's viability will become incertain.

Disclosure: RIL, which owns Reliance Jio, also owns Network18 and moneycontrol.com

Below is the transcript of Mahesh Uppal and Naveen Kulkarni's interview to Reema Tendulkar and Nigel D'souza on CNBC-TV18.

Reema: Give us your initial reaction on the statements made Mukesh Ambani.

Uppal: To be fair, it is on expected lines. I had thought that he would maintain the pressure on prices, he does recognise that first and foremost, he needs to increase his market share in terms of subscribers. He already has the largest market share when it comes to traffic, in other words data usage. But really, what he does want is users and eventually wants a shade of revenues.

The fact that they are now going to price their services would come as some relief to the operator, but not a significant amount as some of you were also mentioning, because these prices are rock bottom. It is good for the consumer and it will be a huge pressure on the incumbents and we should not be surprised by even further consolidation of the market.

Nigel: You heard out all the details. What is you initial take and the impact on the telecom space, particularly the listed ones?

Kulkarni: The listed companies, Bharti Airtel and Idea Cellular, they were pretty much waiting for Jio to start charging the customers. So that has happened, also from here on, the case for the incumbents improves a little bit in terms of their ability to go into the market and have attractive plan and still retain the subscribers.

So, there will be a lot of pressure on the tariffs but from the perspective of ability to retain customers, I feel that that is going to improve from here on.

Reema: So, Jio subscribers will be sticky, right, that is what you are trying to get at?

Kulkarni: What I am trying to say is essentially, these subscriber bases that Bharti, Idea and the other incumbents have, Jio will find it a little difficult to churn subscribers unless and until the quality of services are on par with the incumbents or even better. So, till that point in time which requires some time for them to prove to the customers. Now with the scenario, I feel that they will be able to retain the customers. Even the second sim usage might also start reducing which will mean additional traffic to the incumbents.

Reema: What should be the expected reactions from the other incumbent players to these kind of offers? How do you expect Bharti, Idea, Vodafone to react to the offers today because when the Happy New Year offer had come out, most of the operators said that we will give you an incremental 3gb data for your existing plans, etc. So, now what should be the expected reaction?

Uppal: They will continue to be under pressure. They will not be thrilled to hear what they have just heard. Clearly, it is better than before in the sense that now, there will be some charges that the company will levy on its future customers. But these are still very nominal rates and these certainly would put a huge pressure on the incumbents and I am not sure that they are going to be thrilled by this.
First Published on Feb 21, 2017 03:40 pm
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