Airtel buys Tikona, 4G becomes telecom’s new battle ground | business news | Hindustan Times
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Airtel buys Tikona, 4G becomes telecom’s new battle ground

As Airtel buys Tikona and Telenor, Idea Cellular merges with Vodafone, and Reliance Communication does it with MTS, Aircel and Tata Teleservice, the battle over 4G started by Reliance Jio is here to stay.

business Updated: Mar 24, 2017 13:01 IST
Sunny Sen
Sunny Sen
Hindustan Times, New Delhi
Bharti Airtel,Tikona Digital Network,Reliance Jio
Man walking past a shop with an advertisement for mobile service provider Airtel and Idea in Mumbai. Buyouts, mergers and quick exits -- as India's richest man shakes up the country's ultra-competitive mobile market, telecommunications companies are scrambling to either consolidate or cut their losses and run. (AFP)

For the second time Mukesh Ambani has changed the rule of the game in Indian telecom, and has made the superfast 4G networks his new battle ground, after he launched his telecom venture Reliance Jio in September.

The first time he did it was when the Ambani brothers – Mukesh and Anil – were still together. Their telecom company Reliance Communication, a part Reliance Group founded by late Dhirubhai Ambani, launched the Monsoon Hungama in July 2003, crashing call prices down to 40 paisa per minute, forcing Airtel and others to slash tariffs.

This time he offered 4G internet services to its customers for free, and became the fastest growing company, marking the beginning of a price war. Ambani wants to take high-speed internet connections to the remotest parts of the country, and offer them at an affordable price.

The move resulted in incumbent operators, Airtel, Vodafone and Idea Cellular appealing to the telecom tribunal and the regulatory authorities to look into the matter, without much help. Ambani, meanwhile, said that on Reliance Jio, customers will never have to pay for voice calls.

Voice is close to 75% of telecom operators’ revenue, but that is changing fast.

The heat others are facing is evident as Vodafone and Idea Cellular announced its merger to form the largest telecom company in the country, with 42% market share. Sunil Mittal-led Airtel announced that it is buying Telenor’s local arm in Febraury.

On Thursday Airtel also announced the acquisition of Tikona Networks, which has 20 MHz of 4G spectrum in five circles, for Rs 1,600 crore. “We believe that combining our capacities in TD-LTE and FD-LTE (both technologies to deliver 4G service) will further bolster our network, and help us provide unmatched high-speed wireless broadband experience to our customers,” said Gopal Vittal, managing director and CEO of Bharti Airtel (India & South Asia).

The reason for the fight is simple – according to CyberMedia Research, by the end of the year India will have 225 million 4G users – it already has 160 million. That is nearly half of India’s wireless broadband population.

A Nokia study shows that 60% of India’s new (or incremental) internet users came on 4G. The shift comes even before users fully shifted to 3G from slow second-generation internet usage.

Relaince Jio’s free pricing took the industry by surprise, impacting revenue and profits. Analysts with brokerage firms said that the impact will linger for the next three to four quarters. “We expect triangular battle for market share to be a prolonged affair… We believe the challenges for the industry are unlikely to change due to sustained aggressive strategy of Reliance Jio to gain scale,” writes Abhishek Gupta of IDFC Securities in his report.

The battle comes at a very high cost. In January, Reliance Jio announced an additional Rs 30,000 crore of investment into building 4G infrastructure. In November 2015, Airtel had announced Rs 60,000 crore of investment over three years, most of which has gone into building the 4G infrastructure. Last year, Vodafone said that it will invest Rs 47,700 crore, in India, to cut debt and expand operations.

Meanwhile, Airtel and Reliance Jio have indulged in a battle over whose network is the fastest. Ookla, a global internet speed testing firm, said that Airtel offers the fastest internet. Jio challenged Ookla’s claim, and urged in a public statement that “customers should not be misled”, as the data used to declare the winner has its limitations.

On Thursday, Ookla backed its claim. “Due to limitations of the Android platform, the “active carrier” does not always indicate the actual data provider in devices with multiple SIMs. In these situations, Ookla applies additional data sources and mechanisms during post-processing... Airtel’s margin of victory increased when the complete analysis was performed,” Ookla’s official statement said.

Reliance Jio responded soon. “Any results that are based on incorrect and contaminated primary data cannot be definitive, only probabilistic. It is a travesty that such results are being passed off as “official” results by a market-leading operator. We will continue to expose such misleading practices and raise it at suitable forums,” said a Reliance Jio spokesperson.

The battle of the giants have left fewer telecom operators in India – down to five, including state-owned BSNL and MTNL, from 13 in 2008-09. Reliance Communication is merging operations with Russian government-backed MTS, Aircel and Tata Teleservices.

At the customers end, only services matter. Issues over call drops, which was a bone of contention seems to be trivial as internet speeds become matter of concern. This is just the beginning of the new telecom regime as voice moves out of the battle ground, and data becomes the new ammunition.