NEW DELHI: The past four years have seen the wireless telecom market become the arena for a
no-holds-barred price war that has pushed several rivals to bankruptcy and reduced the number of private players to three: Bharti Airtel, Reliance Jio, and Vi (erstwhile Vodafone Idea).
But margins have already been cut so thin here that firms have begun raising prices again—Vi doing so with certain postpaid plans just a few days ago. The under-penetrated broadband market, however, is a very different story. And it may well be the arena for the next price war. A recent report by Motilal Oswal Financial Services (MOFSL) indicates that the broadband market offers a potential margin of nearly 35 per cent, and a ripe opportunity for expansion fuelled by price cuts.
The cost dynamics of the broadband business also offer companies to achieve lucrative margins with scale. “This presents the opportunity to take sharp ARPU cuts to expand its share of the pie in the market, similar to wireless, or improve margins to 45-50 per cent even at a low Rs 400-500 ARPU with a healthy growth trajectory,” the study said.
Both Bharti and JioFiber (Vi doesn’t have a large presence here) have significant opportunities to expand and are already doing so. While both have slashed prices down to sub Rs 500 levels to attract low-income customers, most players in the segment have also started investing in network expansion-such as increasing the number of homes they can service (home-passes) in order to cater to rising demand.
Both Bharti and Jio have significant earning potential in the segment, with analysts noting that for Jio this number stands as high as Rs 24,000 crore over three years with potential revenues of Rs 48,000 crore.
Airtel, for its part, could see a potential EBITDA of Rs 8,100 crore and revenues of Rs 16,500 crore in the same period from the segment.
Tiny market size of $2bn in India
India’s Home Broadband market has a minuscule $2 billion market size, accounting for a meager nine per cent share of the country’s Rs 1.7 lakh crore wireless market, Motilal Oswal said in a recent report.