Is Reliance Jio already the second largest telecom firm in India?

The Telecom Regulatory Authority of India’s (Trai’s) financial report for the March quarter puts Reliance Jio Infocomm Ltd’s adjusted gross revenue (AGR) at Rs 6,218 crore. This is about 22% higher than Vodafone India Ltd’s revenue and only 12% lower than market leader Bharti Airtel Ltd’s AGR of Rs 7,087 crore.

Based on these numbers, Reliance Jio has a market share of as much as 25.6%, less than two years since its launch. Vodafone and Idea Cellular Ltd, both of whom had a head start of about two decades over Reliance Jio, had an AGR market share of 21% and 16.6%, respectively.

Click here for enlarge

But apparently, the AGR figure needs to be adjusted some more to reflect true market share. The AGR reported by telcos for their various circles does not fully capture revenues subscribers pay for roaming and national long distance (NLD) calls. As such, it makes sense to add NLD revenues reported by telcos, to the extent these are used by their captive subscribers, and arrive at, if you will, adjusted AGR (AAGR).

Based on estimates of Kotak Institutional Equities, after making these adjustments, Reliance Jio’s market share stands at 20.7%. We made another adjustment to reflect revenues of Aircel Ltd, which filed for bankruptcy earlier this year and didn’t bother reporting revenues to Trai.

Based on this so-called AAGR data, Reliance Jio has a market share of 20.4%, which is not much lower than Vodafone’s 21.5%. So while the new entrant may not be No.2 yet, it isn’t far away from the mark.

The company may well reach that milestone in the June quarter, although it may get relegated back to the third position after Vodafone and Idea announce their merger.

While Reliance Jio has quickly grabbed a fifth of the market, its cut-throat pricing has also led to a fall of over a third in the revenue of large incumbents. Small firms’ revenues have fallen by 85%, and it’s only a matter of time before they completely disappear.

Since Reliance Jio’s launch, the overall industry size has fallen by about 30% based on the above-mentioned AAGR data. A moot question is how much lower it can go with Reliance Jio aggressively continuing to vie for a larger piece of the pie.

As pointed out earlier in this column, Reliance Jio’s actions suggest it is happy to live with a high share of a market that has shrunk considerably, rather than a lower share in an unshrunk market. As the drop in revenues in the past six quarters show, that is extremely bad news for incumbents.livemint

Social Media Auto Publish Powered By :