Managerial Economics Indian Telecom Sector : Effect of Reliance Jio on market Equilibrium Group 3 Presentation – EMP 2018 Oct Batch

Source: Department of Telecom (Annual Report)Source:

Launched its services on 5 September Crossed 100 million subscribers end of February This is the fastest ramp-up by any mobile network operator anywhere in the world. Jio owns spectrum in 800 MHz and 1,800 MHz bands in 10 and 6 circles, respectively, of the total 22 circles in the country, and also owns pan-India licensed 2,300 MHz spectrum. The company has a network of more than 250,000 km of fiber optic cables in the country,

Source: Bloomberg HH index = 1480 (Pre- Jio) HH Index = 2800 (Post Jio)

Company NameTotal Sales (Rs in crs) March 2018 Bharati Airtel53663 Vodafone idea27828 BSNL28403 Tata5120 Reliance Infocomm2231 Total Industry Sales HH index = 1480 (Pre- Jio) HH Index = 2800 (Post Jio) Market Concentration reached to HIGH CONCENTRATION ZONE ( >2500)

Reliance Jio launched a new Technology known as 4G VoLTE Emphasized on Data rather than Voice call segment of Market Tied up with domestic handset maker Intex to supply 4G handsets enabled with voice over LTE (VoLTE) feature Partner with local cable operators to get broader connectivity for its broadband services Induction of Multimedia apps and Google play

Airtel ArgumentReliance Jio Argument Jio announced unlimited voice calls, SMS, Roaming irrespective of volume of usage 4G Segment is not separated from 2G and 3G. Jio is new entrant competing with stalwarts operating more than 20 years Called it as ZERO or PREDATORY PricingConsumer has to incur additional cost to avail their services buying 4G hand set Creating MONOPOLY or NEAR MONOPOLY They are NOT market leader and hence cannot dictate the market DoT issues same license to all telecommunication service providers i.e. Unified Access License and it does not differentiate between service providers based on the technology deployed by them.

Oligopoly Market – Kinked Demand Curve Note: Chart is for illustration purpose only. If Price Increases NO Other player follows leading to loss to who increases price If one decrease price, followed by others, lead to kinked demand curve Elastic demand (D1) Becomes Inelastic Demand (D2)

Effect on Average Revenue per user (ARPU) per month between Jio alone and other Service provider together (ARPU in INR) Airtel and others Strategy Sustain priceReduce price Reliance Jio Strategy Sustain Price Reduce price Note: ARPU is assumed for illustration purpose

Jio Rs. 448/- PlanAirtel Rs. 448/- Plan Validity: 84 daysValidity: 82 days 2GB per day1.4GB per day Unlimited Calls (Local, STD and Roaming) 100 local/national SMS per day Jio Rs. 149/- PlanAirtel Rs. 149/- Plan Validity: 28 days 1.5GB per day1GB per day Unlimited Calls (Local, STD and Roaming) 100 local/national SMS per day

33% Revenue has been dropped as compared to that FY 2017

 Telecom Industry is under turbulent state  New collusion are taking place  Enhanced subscriber base is of great sign  Enhanced FDI in telecom Sector will boost the market  Despite fierce price war Market has capability to bounce back and eventually attain a new equilibrium