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In mid-2016, the Indian telecom sector was taken by storm as Reliance Industries Ltd (RIL) had launched its telecom service nationwide, and the charges were cheap, rather very cheap. To add to it, the company, using its well-established infrastructure, provided relief to customers facing poor connectivity issues – that had plagued few of its rivals.
As Jio offered a quality service at cheaper prices, many of the telecom users moved from rival companies to Reliance Jio. Now rivals had to keep up in the game. Many of them started reducing the prices.
Interestingly, within two weeks of the launch of Reliance Jio, rival telcos Aircel Ltd and Reliance Communication announced a merger. Reliance Communication, or RComm as it is popularly known as, was owned by the younger brother of Reliance Industries promoter and billionaire Mukesh Ambani – Anil Ambani. Within a year, the deal was called off citing regulatory and legal issues. As both companies were way over-leveraged before the launch of Jio, by 2019 both RComm and Aircel declared bankruptcy and had to shut shop. Back in 2002, when Mukesh and Anil hadn’t split, and RComm was jointly controlled by the brothers, the company came up with a “Monsoon Offer”, that drastically reduced the tariff – much like Jio in 2016. However, in 2005 split, telecom being one of the new sunrise sectors, went to Anil.
After the launch of Jio, another set of rivals also announced merger – Vodafone India Ltd and Idea Cellular. The launch created India’s largest telecom service provider – albeit for a very small period as customers started moving out of Vodafone-Idea, or Vi – as it is now known. Soon the company dropped to third slot. Plagued by issues of profitability and increased dues to be paid, threat continues to loom over Vi – and many worry it can persist as a “going concern”.
In fact, after the Indian Supreme Court, asked telcos to pay long pending adjusted gross revenue (AGR) dues and interest, many sectoral experts predicted a duopoly in the telecom sector.
The only telco that has withstood the competition thrown by Jio and Indian top court’s ruling on the AGR dues, has been Airtel. The company has kept a war-chest of INR600 billion ready – and named it as Project Leap.
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But, in all this melee, Jio has made it big – and how. With 426.2 million subscribers, the company is now India’s largest and world’s second largest telecom service provider. With 940.86 million subscribers, China Mobile Communications Corporation – three-fourth of which is owned by the Government of the People's Republic of China – is the only telco ahead of Jio.
Not only that, the subsidiary of larger RIL, reported a net profit of INR125.37 billion (US$1.7 billion) for the last financial year. This places Reliance Jio in abetter place than many of the traditional and listed blue-chip companies – the firms that should have been competing with the parent company of Jio – RIL.
