Airtel best placed to take on Reliance Jio: study

With the 'soft' launch of Reliance Jio's 4G mobile services, currently restricted to Reliance employees,  the incumbent operators will see fresh competition after more than a decade.

The challenge is on two counts - first, Reliance is a big player with deep pockets and a wide reach, being the only firm with a pan-India 4G licence. Second, by bringing 4G services, it has thrown a challenge to the incumbents as to how fast they are able to set up their 4G networks and get customers to migrate to it.

Analysts see current market leader Bharti Airtel to be the best positioned operator to face the challenge from Jio. The number two and three operators, Vodafone and Idea, are expected to lose more of their market share to Jio.

''Qualitatively, we assess each incumbent's risk of losing 3G revenue to Jio in each circle as subscribers migrate to 4G, based on whether the incumbent has sufficient spectrum to defend share.

We assume no loss for incumbents with 20MHz, minor loss if they have 10MHz or if no competitor other than Jio has spectrum, and significant loss if they have no 4G spectrum,'' Bernstein, a global asset management firm, has said in an exhaustive analysis.

According to this analysis, Bharti has the lowest risk of revenue loss with 58 per cent of current 3G revenue not expected to experience any loss; only 6 per cent will be open to significant loss. However, both Idea and Vodafone have 35 per cent of high-value subscriber revenue exposed to significant loss; Idea has 10 per cent of revenue with no risk of loss while Vodafone has none.

While Jio has the capability of providing 4G services across 22 circles, Bharti can provide it in 15, Idea in 10 and Vodafone in 8 circles.

According to Bernstein, in China, most existing 3G subscribers had fully migrated to 4G devices within 21 months of the 4G launch. It expects a much smaller number of 3G users in India to behave in roughly a similar manner.

Currently, roughly 9 per cent of total mobile subscribers are on 3G and contribute 30 per cent of industry revenue.

Bernstein has estimated that the total number of Indian 4G subscribers will reach 29 million by the end of 2016. It says that 4G will account for 3 per cent of subscribers and 11 per cent of industry revenue by the end of 2016, and 13 per cent of subscriber and 34 per cent of revenue by the end of 2017.

The big advantage Jio would have over competitors is its empty network, which would provide much faster network and downloads compared to the networks of the incumbents. For instance, analysts of Credit Suisse, who have tested Jio's 4G network, claim it is faster than that of Airtel. They claim to have experienced peak download speed of 70 Mbps on most occasions and in the 15-30 Mbps range while on the move. In comparison, Airtel 4G gives 10-20 Mbps. However, as Jio takes on subscribers, this edge may vane.

Another reason for Bharti being best placed to take on the Jio challenge is because in terms of holding across bands and superior mix of spectrum, it is best placed with around 16 per cent of the total allotment and 80 per cent of it is liberalised, which covers maximum the percentage of its revenue for 3G and LTE at 98 per cent and 75 per cent respectively.

A Citi research report analysing the impact of Jio's launch on the stronger incumbents says, ''While there are valid concerns on the launch of Reliance Jio, the impact of new launches on existing operators has been mixed, looking at the global experience. Network quality and coverage, however, is clearly more important than pricing.

''Large existing operators are also better placed given their existing base versus having to acquire entirely new subscribers and have faster speed of network rollout. Our sensitivity analysis of the Jio launch on the incumbents' market shares show that even though the top three players control 70 per cent of the data market and will see some share erosion, the weaker and smaller operators with lower network quality/coverage are likely to be impacted more.''