Jio, the telecommunication giant which entered the market three years ago, has revolutionized the industry. It forced the smaller players to exit from the market and the big ones slashed tariff rates to survive. However, the cut-throat competition was only for the prepaid market, the postpaid customers have been loyal to older players so far.
Jio now aims to take the battle into the postpaid market as it is more lucrative. The postpaid users constitute merely 5 per cent of total users but contribute 25 per cent in revenue. Most of the postpaid users are from the upper strata of society and are more concerned about services than the cost of the subscription.
Mukesh Ambani led Reliance Jio aims to take on existing major players (Airtel, Vodafone-Idea) in the postpaid market through a multi pronged strategy. The company will bundle the postpaid plan with its much-awaited broadband plan, which is to be launched on September 5. It will also offer customized plans separately for users who are not willing to take the bundled offer due to some reasons.
“Jio remains hungry for customers and revenue share, and having dominated the prepaid platform, it will try to replicate that success in the postpaid segment and also leverage its upcoming enterprise offerings to further boost postpaid business gains,” said Rohan Dhamija, partner & head of India & Middle East, Analysys Mason.
According to analysts, Airtel will be able to retain its postpaid customers despite the onslaught from Jio but Vodafone Idea is vulnerable. “Vodafone Idea is more vulnerable to lose this (read: postpaid) market share,” in a scenario where “it curtails investments in networks and exits a few loss-making circles”, said Bank of America-Merrill Lynch.
Vodafone Idea is fast losing its customer base in prepaid as well as the postpaid segment. The company has lost 6.7 crore customers since it launched the incoming tariff plan last year. If Vodafone-Idea is forced to get out of business, given thousands of dollars lost, the telecommunication market will become duopoly with Jio and Airtel being only players.
Mukesh Ambani is known to work towards a monopoly in the markets, a style similar to his father’s. In the early days of the business, his father monopolized the thread-making business, and now he himself is doing the same in the telecommunication market. Friends and rivals use two words to describe Mukesh: obsessive and ruthless.
The entry of Mukesh Ambani-led Jio forced many small players out of business and the merger of Vodafone and Idea, two of the largest independent telecom operators. The data tariff rate in India is the lowest in the world, thanks to Mukesh Ambani. Since his company entered the market with a 1GB free data and unlimited free calling package throughout India, the prices of calling and data services have crashed, the existing players like Vodafone and Jio have been forced to cut the rates in fear of being thrown out of the market. He was being compared to the freebie distributing Chief Ministers of Tamil Nadu but he was doing it with his own money, not the taxpayers’ money.
