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Corporate Feb 20, 2013

Is Mukesh Ambani making a telecom comeback with Reliance Jio?

By Firstbiz Staff

Since Reliance Jio Infocomm, the telecom venture of Mukesh Ambani's RIL, is the only company with BWA spectrum across the country in the 4G space, it is but natural that it will be the chief beneficiary of the government tweaking norms and allowing 4G licence holders to finally offer voice calling services.

So far the telecom commission only allowed high-speed internet services on mobiles under 4G spectrum. But now it has permitted 4G licence holders to offer voice calls to customers by paying additional Rs 1,658 crore for a pan-India licence.

Reuters

Reuters

The decision is likely to see the return of Mukesh Ambani to basic telephony services. RIL has already paid Rs 4800 crore to Infotel Broadband to pick up 95 percent of its stake and renamed it Reliance Jio Infocomm. But with the absence of voice services, the company is yet to roll out its 4G services. It has even sought the telecom department's approval to test voice services on its 4G networks and even plans on investing more than Rs 50000 crore in Long Term Evolution, or LTE network (the technology which RIL will use to deliver its broadband services.) Though the operator will have to pay an additional fee, the opportunity is worth every penny.

While this would mean another stream of competition for existing cellular mobile telephony service providers, it would give subscribers access to the latest technology, offering new and better services.

Clearly, RIL is planning on making a big-bang comeback and it is planning on doing so all by itself rather than by buying out another telco. Through its subsidiary Infotel, it is also considering setting up telecom towers to offer bundled voice and data services , moving away from its earlier "asset light" strategy which entailed tower-sharing deals with other telcos, a Times of India report said yesterday.

But this move into the voice market would intensify competition and hurt rivals such as Bharti Airtel and Vodafone which fear that Ambani could once again cause a price blood bath by introducing these services at dirt cheap tariffs at a time when most telcos have raised tariffs for both 2G and 3G by at least 20 percent.

Voice accounts for almost 85 percent of revenues, while data is still at a nascent stage. Data services contribute just about 5-6 percent of the total mobile services revenues as fewer people browse the Internet on phones.

"The equation was different when he was in data services - revenue potential, though big, still left a lot unexplored. Experts say without voice revenues, Mukesh would have had to either join hands with another telco or buy out a telco operating in the 2G and 3G space so that he could offer both data as well as voice services. Now he does not need to do any of this," says a Business Standard report.

The report goes on to quote a Vodafone official as saying that the telecom department's order was illegal because had telcos known that the BWA auction could be used for voice too, they too would have bid for it.

A report in the Hindu Business Line suggests that GSM operators, including Airtel, Idea Cellular and Vodafone who had won 3G spectrum in the 2010 auction, but not a pan-India footprint, are now pitching for more 3G Spectrum and have suggested taking 15 MHz of air wave from Defence Ministry which had earlier agreed to vacate some spectrum in return for an exclusive optic fibre network for the armed forces.

The Cellular Operators Association of India has written to DoT and said that "Insufficient 3G spectrum in the 2,100 MHz band will not only hurt the growth of mobile broadband services, but will result in fragmented spectrum allocations. This will prevent operators from establishing a pan-India 3G footprint, leading to suboptimal use of scarce and valuable spectrum," the Hindu Business Line report said.

So while cash-rich RIL's 360-degree play in multimedia and communications may intensify the price war in the telecom space once again, RIL is still only evaluating strategies. If it opts to go solo, as the above mentioned TOI report suggests, the launch is likely to be delayed further because of lack of infra to support such a network.

by Firstbiz Staff

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