In Business Model, Internet Access, Mobile

S&P Global Ratings expects the Indian telecom sector to consolidate with the top three telcos–the Idea-Vodafone combine, Bharti Airtel and Jio–eventually controlling 75 percent to 85 percent of industry revenue.

That could lead to a stable industry structure more akin to other markets in South Asia and Southeast Asia.

“Jio, through heavy discounting, has managed to grab 10 percent of the country’s telco subscriber base in less than a year, but costly discounting practices cannot last forever,” Ashutosh Sharma, S&P Global Ratings credit analyst, said.

You might well argue that the pricing war  is a relatively short-term issue, and will abate once the weaker service providers are driven from the market.

That might not be the case. If declining revenue per service, declining revenue per account and saturation of the human customer base happen, as virtually everyone agrees is going to be the case (eventually, every human who wants to use mobile communications will do so), then it is not clear that pricing pressures abate.

Those pressures will continue at a lower intensity, but still significant level, as total demand peaks and then starts to fall.

You might not believe all telecom products have life cycles like all other products, but the evidence suggests otherwise. While subscription growth continues in developing markets, in developed markets where virtually everyone already uses mobile services (and fixed services if that is what they want), average revenue per account or per user dropping, for almost every service (the exceptions are entertainment video, where telcos are gaining share, even if the total market is declining).

Though global industry revenue is flat to declining, saturation has not been reached in many developing markets. That means the reality of market saturation has yet to become obvious.

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