The Telecom tariff war that began earlier this year from the new operators financed by dare devil bankers and private equity funds appears to be stabilizing. The reversal of traffic to the incumbents (after they matched tariffs, importantly) suggests that this round of action has gone to the incumbents, one would do well to remember that (1) no meaningful challenger has been knocked out of the ring yet and (2) there are more rounds likely to come.
However, with onset of substantial and concentrated (non-rural) capacity, more than optimal number of players in the industry, sub-optimal spectrum allocation, and low-quality incremental subscribers the industry will face structural issues.
Putting the entire battle in Boxing terminology, no challenger has been knocked out yet. The bout has not ended and likely has more rounds, punches, and counter-punches ahead, and incumbents did win round 2 on points, but did not come out of the first two rounds unscathed; they suffered bruises on the way – in the form of sharp decline in RPMs and almost five quarters of near-zero revenue / EBITDA growth. Except Vodafone and Bharti Airtel, every other operator has suffered, atleast in some circle.
New operators realize that a pure tariff-cut driven subs acquisition strategy is unlikely to tilt the scales in their favor, they continue to devise (and rollout) strategies to capture the meaty (mid to high end, revenue market share differentiator) segment of the market. The disruption they cause to the market in a bid to succeed will likely hurt the incumbents as well.
Who will dare for the next round of competition – The Challengers or The Incumbents ?
