Telecom wars have heated up in India, with Vodafone investing $7.2 Bn in its India unit. This is a direct challenge to Mukesh Ambani, the richest Indian, who launched Reliance Jio earlier this month.
Vodafone India's Plans
Vodafone has announced the investment ~$7.2 Bn in its India unit, to bolster its finances. Vodafone India is expected to use these funds to expand its network and bid for spectrum in an upcoming auction. This equity infusion represents India's largest FDI (Foreign Direct Investment) inflow till date.
Beneficiaries of a Telecoms War
The biggest beneficiaries of a war between telecom companies would be the government and customers. The Indian Government is planning to auction spectrum beginning from 1st October and has targeted raising INR 5.6 Tn (~$80Bn) from the auction and related levies. If Vodafone and Jio get into a bidding war for scarce spectrum, the Indian Government's target will be easily achieved. Customers are also expected to benefit, as telecom companies will try to keep tariffs as low as possible to attract customers.
Focus on Mobile Internet
There has been an increase in mobile internet data usage as smart phones becomes more accessible and increasing number of Indians access mobile applications on the go. Data ARPU (Average Revenues Per User) has seen strong growth and this has contributed to the profitability of telecom companies. The new tariff wars between telecom companies are in the data space and not in voice.
Would Cryptocurrencies Benefit?
The focus on delivering cheaper internet to the masses is likely to benefit Cryptocurrencies as well. Telecom companies, however, would not directly encourage Cryptocurrencies. One of the reasons is that Cryptocurrencies could be in direct competition with telecom companies in some areas. Most telecom players (including Vodafone) have obtained payment bank licences in India. Wider acceptance of Bitcoin and transfer of value using Cryptocurrencies would dampen the profitability of payment bank arms of telecom companies.
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