A Look at the Horizon (Future of the telecom industry)

Reliance Jio and its effect on RIL stock which has been graciously been rewarded by the investors. Over the past year it’s stock has almost doubled. Pushing Mukesh Ambani to the richest man in Asia. It should be noted the faith of the investors lies solidly on Mukesh Ambani’s persona than balance sheet predictions. Mukesh Ambani Has been considered a risk taker. He has not always had the best strategy but consistently strived for to grab all opportunities. Some of his other recent ventures include the 2010 to 2015 investments ($8 bn) on American shale oil fields. The lower oil prices have forced him to offload RIL’s shale oil assets at a loss. (Reference). RIL invested another $10 bn in gas fields off India’s east coast which has produced less Gas than expected. They have also been accused in the same oil fields of drilling in neighbouring fields. The case is still in arbitration for $3bn USD to be paid to the Indian Government (Reference). The RIL group has also invested $2bn USD in Its retail business which is yet to declare a substantial profit. While his competitor Future group’ Big Bazaar has (Reference). Regarding RIL’s foray into telecom. His competitors have introduced strategies impairing his growth in the sector. All the incumbents after waiting for Jio’s predatory pricing offers to cease have started their own predatory pricing strategies. Take an example of Airtel who during the entire Jio’s welcome offer. Rode out the storm by having very few new offers to attract new users focussed on customer retention. After Jio’s  offers were done they announced a slew of offers like free data, retention of unused data. This has led to them having the highest user acquisition in the industry in the recent quarter. Shareholders have been rewarding airtel for its efforts. Their shares have gone up just in the last quarter by more than 25%   Also the welcome offer though welcomed by many as a novel offer in early stages had slow internet speeds due to congestion (Forcing Jio to place caps on data limit per day). Also interconnection issues led to unreliability in call services. This didn't help its reputation with high value customers (i.e. Postpaid and corporate connections). Also a lot of these development for Jio have been through raising of debt RIL currently has $12 bn or maturing debt (less than 3 years). Which it is attempting to refinance through bonds. If these bonds fail RIL will find it difficult to further infuse capital into Jio and can even lead to default. Which might be looked upon very critically by the present overstressed debt markets and media houses. This will bring a further negative outlook on the Jio brand (Reference). With these developments will Jio trump the incumbents or will it be another Kingfisher Airlines which launched to much fanfare and hype and took a dominant position in market share for a short time but the following did not translate into revenues eventually dooming the airline. While players like Jet Airways and Indigo Airlines wethered through the storm. Indigo Airlines wethered the stiff competition from Kingfisher Airlines and the high oil prices with a profit.