4G calling; 2015 has promises and challenges for the Indian telecom sector

Another year comes to an end for the Indian telecom market. While 2014 year was significant, 2015 will be crucial in defining the Indian telecom market. We present below the key trends which we believe will dominate the industry in 2015.

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OTT wars: Fresh from the Airtel’s move to charge internet usage differently, we expect to see many such wars between operators and OTT players in 2015. While the wars were more subtle in the past and regulators were used to tame OTT, operators have now taken it upon themselves to fight the OTT wars. We expect differential charges, bundled packs based on preferred applications (promoting self apps) and revenue sharing agreements with OTTs as kinds of strategies which operators would resort to in 2015.

4G market: Reliance Jio 4G services will be launched in India in 2015. The launch of Jio will lead to multiple things simultaneously:

  • We expect data price wars between Airtel and Jio thereby benefitting the customers
  • Wide availability of 4G will lead to its wider adoption thereby increasing the 4G subscriber base
  • There will an influx of 4G handsets at entry and mid-segments levels due to increased demand for 4G devices
  • To incentivise 4G, stress will be laid by operators on different forms of content right from music, videos, images, gaming etc 

Tariffs: with respect to tariffs we expect the following from the industry:

  • Increase in 2G data tariffs to bridge the gap between prices thereby prompting subscribers to adopt 3G and 4G
  • Increase in 3G data tariffs and reduction of 4G data tariffs to promote 4G by select operators
  • Voice tariffs might increase due to factors like aggressive bidding by operators in the upcoming spectrum auction.

Consolidation: MD of Vodafone India has expressed on various occasions on how competitive the Indian telecom market is with 12 players and there is a need for consolidation in the industry so that the players can operate more efficiently. With Loop mobile already closing the shops, and NTT announcing its plans to pull down shutters, industry is already moving towards consolidation. We do not expect major mergers in 2015 but industry conditions will prompt TRAI to revisit the regulations and make it more conducive for mergers and consolidation to take place in the industry.