India has a connection base of 1.2 billion. Let that sink in for a second.

While China gets a lot of attention for its massive subscriber base, this makes India the world’s second-largest telecommunications market.

What’s more, riding on the back of rapidly growing smartphone penetration along with declining data costs, India has become the fourth largest app economy in the world and is set to add another 300 million new internet users by 2025. Mobile data consumption reached 15 billion GB per month in 2017. Not coincidentally, it was also a year which saw the telecom landscape change dramatically. And, while the fierce competition introduced by Reliance Jio has been well documented, it’s worth looking at a little before-and-after to understand the magnitude of changes in the Indian market.

In short, the landscape is reshaping for long-term sustainability and healthy growth. But getting there has involved some major changes.

Let’s look back just two years ago.

In the first half of 2016, India had 13 operators providing mobile services with a cumulative connection base of 1 billion customers (see chart, right, click to enlarge). The launch of greenfield LTE services by Jio initiated a price war, driving down end-user costs. The other operators, needing to compete, sped up their deployment of high-speed mobile data networks adding financial pressure to already struggling businesses. Consolidation ensued.

Financial pressure. Price wars. Bad for the industry, right? Not necessarily.

Consolidation could bode well for operators in India, presenting them with an opportunity to improve profitability because of the size of the market and extent of people who are underserved. The prospect of infrastructure-based investment and tighter pricing discipline, in turn, would see consumers benefit from improved services from operators which have capabilities to undertake investment in service quality and network expansion.

Other factors
To be clear, the changing telecom landscape in India is being driven by more than just the operators themselves. The government and regulators are also taking steps to help the industry and realise the Digital India vision.

Given the telecom sector’s severe financial strain – it holds a debt load of more than INR4.6 trillion ($68.1 billion), an inter-ministerial group was established earlier this year to recommend measures to mitigate financial woes. Its report was placed before the Telecom Commission, which in May extended the time for payment of spectrum bought in auctions from 10 years to 16 years. The result: improved cash flow for operators. At the same time, the government came out with its National Digital Communications Policy 2018. Still in consultation, the aim is to create 4 million new jobs by 2022 and attract INR6 trillion to INR7 trillion of investment in the telecom sector by 2020. Optimal spectrum pricing to ensure affordable access to digital communications is a key mechanism.

But, in the end, amid all the changes, what might it all mean for consumers. You know, the people actually fuelling those 1.2 billion connections?

Correction in plans and prices: Operators are currently forced to offer ultra-cheap services to retaliate against Jio’s price penetration attack. That’s a given. However, in the medium-term, the freebies bubble could well break owing to the deteriorating quarter-on-quarter financial performance of the service providers. Once we are past the consolidation run, the remaining players could regain power to correct for losses by bundling services on a reasonable price tag that is sustainable. We might even be seeing some of this already: Jio, after riding on its year-long price penetration strategy, eventually increased prices in October 2017.
Digital revolution in India: Data usage in last two years grew at a rate of around 500 per cent. And that’s on the back of 30 per cent penetration. Those two points suggest ample opportunities for existing operators to serve the underserved. The availability of low cost smartphones coupled with a government initiative to digitally connect rural and remote regions in the country, will only help.
New innovations: To retain loyal customers amid this fierce competition, operators will be forced to innovate. Price-based competition will only get you so far. What might we see? Converged services combining voice, wired and wireless broadband, television services, content, IoT and financial payments. It’s all potentially up for grabs.

The pace of change in India across the mobile industry has been staggering. It’s easy enough to wonder when industry participants will have a chance to catch their breath. The reality is, recent consolidation only sets the stage for further changes – and that’s where the real fun will begin.

– Aryan Jain, research manager and Manik Singhal, Research Analyst, GSMA Intelligence

The editorial views expressed in this article are solely those of the authors and will not necessarily reflect the views of the GSMA, its Members or Associate Members.