Reliance Jio Attack Will Hit Smaller Mobile Providers the Most, Analysts Argue

Indian mobile service providers with the least market share will take the the brunt of the Reliance Jio attack, losing the most market share when Reliance Jio enters the Indian mobile market, at least according to analysts at Citi Research.

“Our sensitivity analysis of Jio launch on the incumbents’ market shares show that even though the top three players control 70 percent of the data market and will see some share erosion, the weaker and smaller operators with lower network quality and coverage are likely to be impacted more,” the analysts.

The entry of a well-financed new competitor into any market, especially a new firm with domain knowledge, always has potential to reshuffle market share. In the U.S. market, observers speculate about what Dish Network or Comcast might do to the market.

With Reliance Jio entering the Indian mobile market within about a half year, similar concern exists.

In part, that analysis relies on precedent. Examining the impact of market entry by Uninor (now owned by Telenor, marketed as Telewings) on Idea Cellular, the Citi Research analysts found relatively little change.

Idea’s nine circles (markets) contribute 30 percent of the industry’s revenues while Uninor’s six circles contribute 37 percent.

Idea has a seven-percent market share in the nine circles and while it has been gaining share, the pace has been quite slow, gaining one percent in the last year and 1.8 percent over the last two years.

Uninor currently has a 6.4 percent market share in its circles. Uninor also has grown slowly, by 0.7 percent over the last year and 1.6 percent over the last two years.

The point, Citi Research argues, is that incumbents have tended to retain their revenue share in those circles and grow share over time.

The newer suppliers have been gaining share at the expense of the weaker suppliers, not necessarily the service providers with the better networks.

While Idea and Vodafone have gained steadily over the past two years, Bharti has seen a phase of steady erosion between 2008 and 2012.