The bruising telecommunications price war unleashed by the entry of India’s richest man, Mukesh Ambani, into the sector may continue for at least a year or as long as it takes Reliance Jio Infocomm Ltd. to nearly double its user base.

Ambani’s telecom unit “will strive to double subscribers to 400 million before raising prices,” Kunal Agrawal, a Hong Kong-based analyst with Bloomberg Intelligence said in an emailed response to questions. “We expect cut-throat pricing and weak average revenue per user to continue over the next one-to-two years, possibly increasing balance sheet leverage for other domestic telecom incumbents.”

Reliance Jio, which stormed the sector with free calls and data forcing rivals to merge or exit as revenues declined, has amassed 215 million subscribers since its 2016 launch. Agrawal estimates the company will now aim for a dominant market share after turning the industry into an oligopoly and as India’s mobile users inch up to 1.2 billion over two to three years, from 1.13 billion currently.

The carrier’s market share surged to 18.2% in May from about 10% a year earlier, according to regulatory data compiled by Bloomberg. Reliance Jio didn’t answer an email seeking comment.

A dominant position in a “three-way battle” between Reliance Jio, Bharti Airtel Ltd. and a proposed combination of Vodafone Group Plc.’s India unit and Idea Cellular Ltd. would require at least a 33% share of subscribers, Agrawal said. That puts Reliance Jio’s “minimum subscriber threshold” before looking to increase average revenues per user at 400 million, he projected.

“There is a lot of pain ahead before it gets better,” he said.

Source: Read Full Article