Saturday, November 30, 2019

Disruption in Telecom Sector in India


Disruption is difficult to predict as well as navigate but often prove to be a boon for the sector, society and economy. The Indian telecom sector has to face disruption twice in less than two decades and that too by the same entity. The disruptive entry of Reliance Jio in the telecom sector has completely changed the dynamics of the well-regulated Indian telecom sector. It has not only forced consolidation in the sector but has also changed the nature of industry forever as well as indirectly helping to digitalise the Indian economy. This article discusses the different aspects of the disruption caused by Reliance Jio and its impact on the Indian telecom sector.


Disruption has never been an easy phenomenon for any industry and never would be. Most importantly it is one of the most difficult phenomena to predict as well as navigate but often prove to be a boon for the sector, society and economy. Those who navigate it successfully, they are often paid very handsomely. But for most of the players in the market, disruption often proves to be fatal as it normally challenges the existence and survival and most of the players keep on delaying responding to the challenges expecting that things would return to the previous normal which never happens and a new normal replaces the old one. In the process of transition from old normal to new normal, those who respond swiftly and accurately, become winners in the race. However, a study by Accenture suggests that industry disruption can be reasonably predicted (Abbosh, Savic, & Moore, 2018) though this doesn’t seem to be true at least in the case of the Indian telecom sector which failed twice to predict as well as respond to the disruption.

Disruption Twice but the Same Entity

The Indian telecom sector happens to be an industry which has to face industry disruption twice in less than two decades and that too by the same business entity! When Reliance Industry entered the Indian telecom space in 2016 in the form of Reliance Jio, it was the second disruptive entry of Reliance Industry into the telecommunication sector to change the whole dynamics of telecom industry once again forever. However, what is the most strange part of the whole story is that the Indian telecom industry not only failed to predict that disruption altogether but was completely unprepared to respond to the challenges posed by Reliance Jio also. Reasons are unknown but one can assume that there may be two possible reasons. First, the industry was almost saturated and other telecom players might have thought that Reliance Jio wouldn’t be able to gain a foothold in the market to affect their business. Second, the Indian telecom sector was scattered with many players having hold in different circles and none of the players found it important to learn from previous disruption brought by Reliance Industry in the sector.

As the history goes, the first entry Reliance Industry was in the form of Reliance Infocomm (now struggling Reliance Communications under ADAG) in 2002 which resulted into a kind of telecommunication revolution in the whole country making telecom services reachable to anyone and everyone. As result of Reliance’s entry into the telecommunication business when telecom services were considered to be a luxury and status symbol for most of the people in the country; telecom services became reachable and affordable to all, even in the remotest villages of the country. If this phenomenon is termed as democratization of telecommunication services in India, it would not be a metaphor but a reality. The entry of Reliance Infocomm brought the cost of the call and other value added services down by many times making telecom services attractive for most of the people in India.

The first phase of disruption in the telecom sector brought by Reliance Industries in 2003-2004 may be termed as need of the hour for the economy because the access of telecom services was very limited and into a very few hands. At that point of time, the benefits of telecom services were not being utilized to its strength neither by the citizens nor by the government and the economy. Considering the broad range of benefits that an economy can drive from the proliferation of telecommunication services, limiting telecom services in a few hands can be termed as social as well as economic injustice.

Impact of Reliance Jio on Indian Telecom Sector

Following the earlier pattern, Reliance Industry controlled Reliance Jio promised to revolutionize data services in India but at the end of day, it has ended up changing the whole face of telecom industry forever. It has not only brought down the cost of data services but also the calling rates substantially by offering free services to initial customers for many months and then at very cheap prices compared to the previous prices. This was an unexpected penetration strategy adopted by Reliance Jio which eventually increased the competition in the industry. As a result of increased and unsustainable price competition, the number of telecom operators decreased from more than a dozen telecom operators to only three telecom operators in the Indian market across all the circles. Today every other player (Airtel and Vodafone-Idea) besides Reliance Jio is struggling for survival. Airtel is looking for funds in offshore markets through FDI and other routes and Vodafone and Idea have to merge with each other (Kittilaksanawong & Kandaswamy, 2018). Even Vodafone has been contemplating the idea of quitting the Indian market!

The competition imposed by Reliance Jio in the telecom sector has increased data consumption substantially but at the cost of average revenue per user (ARPU) for the whole industry. Because of free services provided by Reliance Jio every other operator was forced to cut prices by many times leading to decrease in industry ARPU. This fall in ARPU is having a negative impact on the bottom lines of telecom operators forcing the whole telecom sector into stress. Not only this, the losses of telecom operators are increasing with every passing quarter except for Reliance Jio and to some extent Airtel. The way private sector operators have pushed BSNL and MTNL on the verge of collapse, Reliance Jio is doing the same with other private telecom operators. However, in the meanwhile, the customers have been the winners.

Regulatory Responses

The Indian telecom sector is one the finely regulated industry in the world. The sector regulator Telecom Regulatory Authority of India (TRAI) has always been keeping eyes on the developments in the industry and has responded in time. However, there have been controversies about the entry of Reliance Jio in the industry from day one and when it launched, the allegation of predatory pricing started rounding the industry. Although, there has been heated discussion about the predatory pricing practices followed by Reliance Jio, but as far as the issue of predatory pricing is concerned, neither the Competition Commission of India (CCI) nor the TRAI has been taking cognizance in this matter (Pandey & Kumar, 2018). Even courts have given clearance to launch services by Reliance Jio. So technically, every effort of penetrating the market by Reliance Jio by offering free services to the subscriber is legal if not ethical which however may have consequences in future.

Forced Consolidation in the Indian Telecom Industry

There have been speculations of consolidation in the scattered telecom sector in India considering the peculiarity of the industry in form of the regular high capital requirements after a short interval and a short profit period. But in the Indian telecom industry, there was no willingness for consolidation. Every operator was operating in its own ways. But the entry of Reliance Jio changed the dynamics and the wait for so-called consolidation in the Indian telecom sector is perhaps over as the Indian telecom sector is on verge of becoming a monopoly or at most the duopoly! The way Reliance Jio is operating in the name of competition is killing the telecom sector while increasing the chances of creating a monopoly, however revolutionising the whole economy and indirectly creating a path for digitalisation of the Indian economy. Disruption does not come in a more brutal fashion than this (Curwen, Whalley, & Vialle, 2019).


At this juncture of time when the telecom sector is basically breaking down rather than just consolidation, the government needs to intervene as soon as possible before it is too late and costly for the government and the economy both. In the long term, it will have a negative impact on the telecom sector. It should be noted that the prices of service would again increase substantially as announced by operators however not to the earlier levels. It is very important to understand that in any way any sector cannot witness healthy growth and survive in the long term. Also it should be noted that all this is happening when the whole economy is already under tremendous distress and a possible slowdown in the economy is knocking on the door (Upadhyay, 2019)!


  • Abbosh, O., Savic, V., & Moore, M. (2018, January 29). How Likely Is Your Industry to Be Disrupted? This 2×2 Matrix Will Tell You . Retrieved from Harvard Business Review: 
  • Curwen, P., Whalley, J., & Vialle, P. (2019). India: A Disruptive New Entrant Causes Havoc. In P. Curwen, J. Whalley, & P. Vialle, Disruptive Activity in a Regulated Industry (pp. 163-187). Emerald Publishing Limited. 
  • Kittilaksanawong, W., & Kandaswamy, S. (2018). Vodafone-Idea Merger: Emergence of a Telecom Giant Amidst Predatory Price Wars. The CASE Journal, 609-634. 
  • Mukherjee, R. (2018). Jio sparks Disruption 2.0: Infrastructural Imaginaries and Platform Ecosystems in ‘Digital India’. Media, Culture and Society, 175-195.Pandey, N., & Kumar, A. (2018). Responding to 4G Telecom Pricing War: Ignore, Accommodate or Retaliate. Emerald Emerging Markets Case Studies.
  •  Rishi, B., Kacker, A., & Gupta, S. (2018). Entry of Reliance Jio in the Telecom Industry: A Ripple in the Ocean. Emerald Emerging Markets Case Studies, 163-187.
  •  Upadhyay, R. (2019, August 25). Slowdown Creeps in Indian Economy. Retrieved from The Deliberation:
- Rajeev Kumar Upadhyay

No comments:

Post a Comment