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  • Five things to know about Reliance Jio’s impact on Indian telecom

    The market chatter, so far, has been about how Reliance Jio Infocomm’s entry has given the telecom industry a thorough shake-up. But there was no empirical study to prove it. However, recent days have seen a spate of reports providing cold hard facts to back the market assumption.
    So, let’s see what different reports tell us about the post-Jio telecom sector:

  • Impact on market share: The incumbent players – Bharti Airtel, Vodafone, Idea Cellular, BSNL and MTNL – have seen their revenue share fall. While Airtel’s share has gone below the 30%-mark for the first time in 15 quarters, Vodafone and Idea Cellular saw their market presence erode sharply.

    On the other hand, Jio has added about 160 million subscribers since it entered the telecom space in September 2016. The newbie has also captured 14% of the market share in the second quarter of FY2018, as per a report prepared by Bloomberg-Quint and Telecom Regulatory Authority of India (TRAI).

  • Pressure on postpaid segment: Jio revenues are primarily driven by the prepaid segment, which has impacted the postpaid business. Postpaid revenues have declined 10% quarter-over-quarter and 23% year-over-year (YoY) to Rs 5,900 crore in the third quarter.

    Moreover, the incumbent players offered heavy discounts to retain their existing customers, which has also contributed to revenue losses, according to a Kotak Securities report.

  • Increase in 4G subscribers: Jio’s entry has coincided with the surge in 4G subscriptions. The telecom’s introduction of cheaper data packs and 4G LTE infrastructure seem to have played a role in it. The Kotak Securities report states that 4G subscribers in the telecom market has increased from 160 million in June 2017 to 197 million in September 2017.

    In contrast, the 2G and 3G user bases are depleting. However, the data usage per subscriber for these two segments has increased in the last few quarters. This could suggest the 4G infrastructure in the country remains inconsistent as more and more people’s 4G networks are lapsing into 3G and 2G services.

  • SIM subscribers: The telecom industry's user base has declined by two million in the September quarter. The Kotak Securities report states two reasons for the reduction in SIM subscribers. One, people are increasingly seeing sense in owning a single SIM that offers multiple services. Two, telecom operators exiting the business added to the consolidation of SIM subscriptions.

  • Consumer spending: Extreme competition made data cheaper and affordable. While this has benefitted the consumer, the telecom sector has taken a hit. The sector’s Gross Domestic Product (GDP) share slid from 1.25% in June 2016 to 0.88% in September 2017.

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  • 8,698 crore

    The central government compensated all states except for Arunachal Pradesh and Rajasthan for revenue loss between July and August 2017. The central government released Rs 8,698 crore to states as a part of the compensation process under GST.