With J&K exhibiting one of the highest cell phone penetration rates in India, data dependence is luring searching giant Google into the state, very soon : Reports
J&K has finally crossed the psychological barrier. By the end of January, it now boats of having 11272751 cell phone users. In a population of around 12.5 million, a teledensity of more than 91 percent means there is only nine percent of the population still lacking access to a mobile phone. Part of it lives in the border areas of the state where signals are more controlled than the hinterland.
With seven players competing to get the best of the lucrative though unpredictable market, it is not the quality of the service that matters. The introduction of 4G by the Reliance Jio Infocomm Limited (RJIL) has proved the game-changer. Though it is hovering around a million-odd figure across the state, obviously because of limitation of its infrastructure, its entry is changing the market completely. This has pushed the Bharati Airtel to embrace 4G quite fast to retain its market share in J&K. It continues to be J&K’s mobile leader.
“There will be lot of changes in the market in coming days,” an informed RJIL official revealed. “With 4G the data requirements and speed are essential so we have requested Google to get into the state and they are hopefully arriving.”
Searching giant, the Google had its servers at nine spots in India before the emergence of RJIL. “Though they had already planned to add more servers to reach a level of 15 but we have insisted that they need 28 servers in India and one of them must be in Jammu,” the official, speaking anonymously, said. “I believe they have agreed and this year will see the necessary spade work.”
If everything goes as per the script, then the servers will be located in Jammu and many allied services will accompany it including developers and on-line trading and service providing initiatives. Unaware of the developments, the government has not planned anything about the opportunities that the Google entry can lead to.
“For the growth of the broadband based services, the presence of a server near-by is very important,” the RJIL official said. “But it means a lot by way of opportunities it can open.”
It might be only Rs 100 crore investments, but the Google entry is a major development by way of investor confidence especially for the services linked directly. “We are talking to some software development companies to get into the state so that Google is comfortable,” the official said.
RJIL official said that his company, which has already invested a fortune in J&K, is keen to evolve a pan-India service that manages modern technology challenges while making it affordable for the common man. “We are into a long term business proposition in which we have loyal clientele and an affordable service,” the official said.
Instead of GSM, RJIL uses voice over long term evolution (VOLTE) technology that has improved the systems. “Initially, the handset alone cost Rs 25000 and now it has come down to Rs 3500 but we are looking at future in which the basic set would cost not more than Rs 2000,” he said. “We want to use economies of scale to sell our service, we will earn gradually as volumes improve.”
RJIL has employed 540 people directly and 300 more indirectly as it operates 15 offices across the state including three in Srinagar and two in Jammu cities.
It has 7000 people directly working with them and 1800 company owned outlets besides 3000 activating outlets and 40,000 re-charging centres in the state.
Perhaps the only cell phone operator that owns slightly more than 1500 kms of OFC across J&K, RJIL is looking at setting up 3800 base tower stations (BTS). It has 1600 up and running. This is in addition to the arrangements the company is trying to enter with sharing the BTS of other operators in the state. J&K has already nearly 6000 BTS which includes almost 2700 belonging to Airtel, Reliance Communication (RCom) has 700, 550 belong to Aircel GTS, Ascend has another 200 and American Tower Company has 250. This is in addition to 1800 BTSs that state owned BSNL owns and operates across the state.
“We are exploring the possibility of taking over some of the BTS from willing sellers,” RJIL sources said. “Of the 70 BTS in Ladakh almost 50 belong to RCom and given the fact that they are under-utilised, we may even request them to sell it.” The company is exploring the possibility of home-towers that would be installed at the top of homes so that the clientele has better user experience.
Given the BTS network, the basic infrastructure required to run mobile services, J&K has slightly more than half of its geography covered already. “This network covers almost 85 percent of the entire population and given the fact that there are seven million active users at any given point of time, it means situation is not bad,” an industry insider said. “Interesting part of the demography is that while urban tele-density is 160 it is only 70 in countryside.”
The more interesting part of the mobile growth is that more than two-third usage is in Kashmir, the most talkative region of the state. “Kashmir is mainly 70 percent of the overall market but it reduces by 10 percent when durbar moves to Jammu,” the insiders added.
With or without RJIL, mobile is one of the major success stories of J&K especially because it came with new opportunities and new challenges too. With Kashmir talking more and defence personnel also contributing by having longer conversations with their families back home, J&K is quite a lucrative market for the cell phone operators. The all India average for post-paid is not more than four percent but in J&K it is already seven percent and the rest 93% is prepaid. And now, 85 percent of Jio’s million-odd new subscriber base is post paid which is expected to be a game-changer.
The average revenue per user is Rs 180 in pre-paid and Rs 300 in case of post-paid. But in Ladakh, it goes up to Rs 1400 because of the massive presence of the soldiers on both Sino-Indian and India-Pakistan LoCs.
The sector is both capital intensive and labour intensive. It involves thousands of crores of investment. The returns are not too bad.
Available information suggests that cell phone service providers pocketed a sum of Rs 1986.75 crore in fiscal 2014-15. For 2015-16, the tariff collections reached a level of Rs 2178.83 crore. In the first three quarters of 2016-17, J&K market has already paid a tariff of Rs 1482.04 crore. The earnings fell down because of the turmoil that led to the ban of mobile telephony for a long time. Against the cumulative earnings of Rs 585.68 crore in the Q1 (April-June 2016), the earning in Q2 (July-September 2016) were Rs 405.39 crore that slightly improved in the Q3 (October-December 2016) to Rs 490.97 crore. (See tables)
Among the players, the Bharti Airtel continues to be the market leader. Dishnet Wireless’s Aircel continues to play the second fiddle with Vodafone, RCom and Jio having not huge difference and are in the range of between nine lakh to a million. The instance is that of the BSNL that was the principle player in introducing the service in J&K but has a subscriber base of not more 14 lakhs despite the turmoil giving it a distinct edge. Numerically it might have a respectable position at No 3 but revenue wise it is a small fray.
The other aspect of the industry is the mobile handset which is also a major capital intensive sector. Industry insiders suggest that it should be more than Rs 1000 crore strong on a year on year basis with almost 10 percent increase. Jio could only sell almost 40,000 sets while introducing the service which continues to be free with almost one GB of data and calling free every 24 hours.
“Samsung alone is selling almost 80,000 mobile phone sets a month,” an industry insider said. “Interesting part is that while the all India average cost of a mobile phone is Rs 6000, it is Rs 7000 for Jammu region and Rs 15000 for Kashmir region, which makes a big difference.”
Mobile phones have led to a complete new economy right from the sale to service. With various services now linked to the cell phone – the most recent being J&K Bank creating a banking application, the cell phone is a main driver of the economy in J&K, too. Though the entire media is directly dependent on the cell phone, J&K is still exhibiting a less incidence of the use of broadband in retail, a phenomenon much better outside J&K.
The linkage of SIM card with the Adhar card and the banking account, the cell phone is now expected to be the main channel for direct benefit transfer from rations to the subsidies and other benefits. In coming days, entire banking will be dependent on mobile phone.
Interestingly, J&K government has been the least beneficiary of the revolution that took place on cell phone front. Being the only state having the right to levy service tax, no cell phone operator has been paying so far. This has led to the arrears of around Rs 1000 crore and the case had gone to the court. The operators had agreed to pay the arrears but were keen to have their own scheme, an option the J&K government has agreed to.
Insiders in state’s Finance Ministry said that the cell phone operators have deposited Rs 80 crore as the first instalment and the arrears would be managed in one year. “This, however, is not true about the prospective service tax that they will have to pay,” officials said.
But J&K government is perhaps the only state that lacks a clear policy on telecom. “While the sector offer opportunities, the planner in the state will have to take seriously the issues that we are facing,” executive of a major player said. “Every time, they have problems on the streets they make us switch the service off and then there is lot of corruption at the ground zero.” He said the single window clearance will help improve the transparency as the sector is labour intensive and offers jobs almost 24 x 7.