Is It Advantage RJio In Virtualization Race?
February 25, 2016

How RCom Aircel MTS Merger Benefits RJio

Ironically, the biggest beneficiary of the three-way planned merger between Reliance Communications, MTS India and Aircel is likely to be Reliance Jio.

The anticipated merger will give birth to a new telco with more than 200 million subscribers taking it ahead of Vodafone India and Idea Cellular. Further, the combined entity will hold nearly 20 per cent of all spectrum across frequency bands of 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz and 2300 Mhz, placing it in an ideal position to offer mobile services across technologies — 2G to 4G.

What is of significance here is Anil Ambani’s RCom’s growing affinity with brother Mukesh’s RJio. In 2005, the two decided to assist each other in their telecom ventures. The two companies already have a passive infrastructure arrangement and are close to signing spectrum sharing agreement.

“This strategic cooperation and partnership between RJio and RCom is a virtual consolidation in the telecom sector and I’m grateful to my elder brother Mukeshbhai for unstinted support and guidance,” Anil Ambani said at the last annual general meeting.

The agreement would further facilitate RCom customers to access RJio’s 4G network on an “asset light” and “minimum capital expenditure”.

RJio, on the other hand, would get a ready subscriber base of millions, second only to Bharti Airtel, India’s largest service provider. This merger would be hugely beneficial to RJio since a key problem for it was access to subscribers and how to churn high data users from their existing service providers. And since both MTS and RCom have roots in CDMA, they would have a good percentage of high data spenders, who would easily move to RJio. CDMA technology is believed to be more efficient for data transmission.

“It is definitely positive for RJio as it will get access to a huge subscriber base,” says Deepak Kumar, founder analyst, BusinessandMarkets.

However, it is not going to be easy since RJio is marketing Voice Over LTE (VoLTE) as ‘true 4G’ while incumbent telcos are focusing on just 4G. VoLTE is believed to offer enhanced quality of service to subscribers, but requires users to use VoLTE device. So RJio needs to offer VoLTE devices at value proposition to subscribers.

If RJio really needs to leverage this access to subscriber base, it would need to use a Circuit Switched Fall Back like incumbents. However, it loses its differentiating factor if it does so.

Whatever be the case, the merged entity will be a big arsenal in RJio’s game plan to dominate the country’s 4G and data ecosystem.

(This story was published in BW | Businessworld Issue Dated 11-01-2016)

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