RIL Entering The Telecom Sector Paves Way For Cut-throat Market

RIL (Reliance Industries Limited), the country’s largest private sector, setting its foot at the telecom sector has made the market seem extremely competitive. It has already turned the tide by being the frontrunner in the 2G-auction bid. The Credit Suisse report claims that there are two key possible outcomes of RIL’s foray in the telecom sector. At present, it will tighten the competition for the 2G auction and in the long term will make the telecom sector highly competitive.

The advantage of being an already developed player with huge cash reserves will always give it an upper hand in the competition. While the steep reserve price that the Government put forward has taken back many, RIL is in a better position to triumph in the bidding due to its healthy financial status. Besides, its counterparts will now have to raise the bid amount further in order to make their position secure in the telecom market now.

At present, RIL is the only company with Pan India Broadband Wireless Access (BWA) spectrum and will soon launch its 4G services. By winning this bid, it will be able to provide a dual mode, where it will have a backup of 1800 MHz network along with data offering. Besides, it can score by coupling its data services with voice bound services. Comprehending the potential of voice telephony in the future telecom sector, the conglomerate will not leave any stones unturned to get the grip of the same. Besides, it will not want to confine itself to the data only LTE strategy where will cater to a small market with a revenue size of $750 million (Rs 4,162 crore) only. The feasibility of the business will be affected considering the fact that it paid $2.5 billion (Rs 13,875 crore) for the spectrum. Additionally, it might take some time for the masses to tether with 3G. Hence, it needs to provide voice services to gain ground in the arena presently. In a nutshell, RIL intends to hold the aces by having access to data and voice services in order to be the likely victor in the segment when it ventures. It will also enable it to give a tough competition to its rivals who have already ventured the market.

The Credit Suisse Report also mentioned that they believe RIL to earn around 6% revenue/market share of the segment it entails in the initial phase, which will slowly surge to 30% per year by the fifth year when the business gains momentum.

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