It was too quiet to last. The relentless and brutal destruction of capital in India’s telecommunications industry was only beginning to give way to a period of peace and quiet. The three operators that survived a dozen in 2016 should be thankful for the end of a debilitating price war. Stable market share and good revenue per user will support the next round of investment.
So imagine the anxiety that bubbles up over the news that the billionaire gautam adani Port and airport owners who had nothing to do with telecommunications until now – will bid for 5G spectrum in this month’s auction.
Six years ago, it was another tycoon – Mukesh Ambani – who disrupted India’s wireless market With cheap data and free calls. He is now the market leader with 410 million customers. For core telco revenue, add services like digital advertising, e-health and mobile education, where the big rewards are still a few years away. All told, Ambani’s Jio Platforms Ltd., which includes Meta Platforms Inc. and Alphabet Inc. Investors are a $95 billion venture, 17% larger than the hydrocarbon empire he inherited from his father, according to Jefferies.
should Ambani Adani now preparing for attack? They are rivals who have managed to move to different classes so far. Ambani scaled into consumer businesses such as telecommunications and retail to remove the group’s excessive reliance on refining and petrochemicals. Adani followed industrial and utility scale customers in transportation, coal and power. But now they have overlapping ambitions, for example in renewable energy and media. Analysts at Motilal Oswal in Mumbai see a “consumer inclination” within the Adani Group, which could move from owning the country’s No. 1 edible oil brand. Could telecommunications be the battleground for the two richest people in the world?
Adani Group is denying any such plan. Analysts are also skeptical whether it is worth fighting over the sector. Bank of America says there is no viable business case for any non-4G telco in consumer mobility given the low tariffs, limited space to differentiate, insufficient spectrum and low return on investment. Jio and Bharti Airtel Ltd., the No. 2 players, are on a financially sound wicket. Vodafone Idea Ltd has survived bankruptcy or recession sales – the fate that happened to many other players – thanks to a state-mounted rescue. Even if Adani decides to make a full-fledged telecom entry by buying out the struggling No. 3 player, it would still require billions of dollars of capital expenditure to recoup the telco’s missing investment. and for what? Only $2 per month per subscriber, what is Jio making right now? It doesn’t seem like the efficient use of debt financing is what drives the Adani juggernaut. Analysts at Bank of America say the scope for a new telco is only in the enterprise sector.
There is some support for that view. For one thing, 5G would be a good fit for Adani’s ambitious renewable-energy game. At the Bloomberg India Economic Forum last year, he said the $70 billion investment commitment had two aspects: generation of clean energy and investment in data centers – the “largest energy consuming industry ever”. Connecting high-speed spectrum with data centers makes sense.
Other in-house businesses, such as a planned super-app, can also benefit. Adani Group said in a press statement, “We are participating in the 5G spectrum auction to provide private network solutions with enhanced cyber security across airports, ports and logistics, power generation, transmission, distribution and various manufacturing operations. Huh.” The winning airwaves in the auction can also be deployed in education, healthcare and skill development. The founder and his family recently announced that they will donate 600 billion rupees ($7.7 billion) to the Adani Foundation, the philanthropy that will lead social investment.
Still, it is not clear why Adani wants to join the auction, while their operation – as a private non-public network – without any license or admission is asked to be allotted spectrum by the government for 10 years. could. “Spectrum acquired through auction is expensive because it is eligible for commercial services,” say the Jefferies researchers. Since Adani is taking this route, it’s pertinent to ask if this isn’t a backdoor entry into consumer wireless. Ambani had followed the same playbook. In 2010, they acquired a small, obscure company that stunned everyone by submitting a winning bid to offer broadband internet (but no phone calls) across India. In 2013, the government approved voice services across spectrum. and Reliance granted itself a pan-India license. This is how Ambani entered telecommunications. This time there is nothing to repeat by your opponent.
Speculations about Adani’s real intentions in telecom won’t end there, even if he makes a modest showing in the auction. If the 60-year-old, first-generation industrialist from Prime Minister Narendra Modi’s home state of Gujarat wants to target only enterprise-level customers, he doesn’t need to spend $4 billion or more to buy 100MHz of spectrum. India. On the other hand, if that consumer wants to get into wireless, it’s too early now to show their cards.
After acquiring spectrum in 2010, Ambani took six years to set up his network and still caught his rivals snooping. Could Adani’s ultimate goal be to tap into the memory of bankers and investors of the carnage that followed Ambani’s entry in 2016? That could, in theory, raise the cost of capital for the industry as a whole—by keeping the market guessing about the titans’ potential clash. Just the threat that Adani might eventually see the capital-hungry Vodafone Idea buckle to a $2 per month customer, in which case it may swoon at it later. There is nothing more troubling for an industry than knowing that the hard-earned peace probably won’t last long.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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