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End to Ambani's Telecom Price War May Be 185 Million Users Away

Reliance Jio has amassed 215 million subscribers since its 2016 launch.

End to Ambani's Telecom Price War May Be 185 Million Users Away
Signage of Reliance Jio seen at one of its store at Indira Nagar, Bengaluru, India. (Photographer: Anirudh Saligrama/BloombergQuint)

(Bloomberg) -- The bruising telecommunications price war unleashed by the entry of India’s richest man 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.”

End to Ambani's Telecom Price War May Be 185 Million Users Away

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.

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The carrier’s market share surged to 18.2 percent in May from about 10 percent 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 percent 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.

To contact the reporter on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Candice Zachariahs, Abhay Singh

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