India is fast becoming the new battleground for global technology and telecommunications giants, as Facebook Inc, Vodafone Group PLC and others vie to connect the country’s population of 1.2 billion to the Internet.
The fight took another turn on Monday, when British carrier Vodafone announced that it was combining its Indian unit with Idea Cellular Ltd, a local operator, in a US$23 billion deal that would create one of the world’s largest mobile service providers, with roughly 400 million subscribers in India.
The country’s cellphone industry is undergoing a drastic overhaul, as more Indians make the digital leap.
Photo: EPA
In recent years, the use of smartphones, which can be bought for as little as US$20, has ballooned, and Indians have rushed to digital services like Google and Facebook. India is Facebook’s largest market, based on number of users.
Local start-ups such as Flipkart India Pvt Ltd, a growing e-commerce player, have taken on the likes of Amazon.com Inc.
“When I get home, if my kids need help with their homework, they Google it on my phone,” said Sikendar Kumar Jha, 37, a chauffeur in Mumbai whose family lives near the border with Nepal. “My wife and kids live here with me, but I video chat with my brothers in my village.”
The explosion of Internet usage has created cutthroat competition among carriers seeking ever faster mobile networks and cheaper data packages in a country where consumers are particularly sensitive to price. And the dynamic has prompted a flurry of investments and deals.
Indian oil conglomerate Reliance Industries Ltd is plowing billions of US dollars into a new cellphone operation called Jio that offers free data and voice plans.
In a bid to compete, Bharti Airtel Ltd last month agreed to buy the Indian assets of Telenor Group, a Norwegian operator.
“Consolidation in the Indian market is the name of the game,” Gartner Inc analyst Rishi Tejpal said in Gurgaon, India. “The survival of 10 to 12 local operators isn’t a long-term reality.”
Under the terms of the deal announced on Monday, Vodafone and Idea would merge their operations in India to create the country’s largest carrier, with roughly 35 percent of the market, based on subscriber figures.
The companies said the merger would allow them to invest heavily in faster mobile networks across India.
Those 4G networks are a basic requirement for movie streaming and watching TV programs on smartphones.
While many in India have feature phones — rudimentary devices with limited or no access to the Web — operators are trying to coax people to invest in budget smartphones that can take advantage of mobile data. Such services offer higher returns than carriers’ traditional voice or text messaging offerings.
“We have responded effectively to the newcomer,” Vodafone CEO Vittorio Colao said on Monday, referring to Reliance Industries and its free offerings. “Anyone who gives anything away for free in life has to charge, inevitably.”
The merger is expected to close by late next year. Vodafone would retain a 45 percent stake in the business, while Aditya Birla Group, Idea’s majority shareholder, would hold a 26 percent stake.
Idea’s other shareholders would own the remaining stock.
The promise of India’s large market has caught the attention of some of Silicon Valley’s largest companies, too.
Facebook tried to break into the country’s telecom market by offering some Internet services, based around its social network and messaging apps, free through a partnership with a local carrier.
However, the Indian government last year blocked that deal, saying that Facebook’s free services broke the country’s net neutrality rules, legislation that stops certain Internet traffic from being treated differently than other data.
Analysts have said the main instigator for the latest merger was the entrance of Jio last year. Jio quickly drew about 100 million subscribers, thanks largely to its free voice and data packages for new users.
Reliance has invested at least US$25 billion to build a fast mobile network across India, which has forced rivals to cut their prices and spend big to try to keep pace.
Reliance plans to pare back its free offerings by the end of this month. Instead, it will encourage users to buy low-cost monthly data plans, in which voice calls are expected to remain free of charge.
For Indians, the price war has led to a flurry of mobile data offers, allowing many to connect to the Internet at significantly discounted rates. That has allowed subscribers to use digital services, such as those from Google and Uber Technologies Inc, that would previously have been prohibitively expensive.
Varun Mahtani, 30, a stock trader in Mumbai, India, signed up with Jio in December last year, combining the carrier’s free data plans with his existing Vodafone subscription.
Mahtani uses a smartphone with dual SIM cards that allows him to toggle back and forth between the two carriers, depending on which one offers him the best rate. That strategy has let him cut his Vodafone cost by 75 percent, to just US$6 a month, while increasing his average Internet usage.
“I use data constantly — Facebook, WhatsApp, YouTube — in addition to work,” Mahtani said, adding that if Jio cut back on its free offerings, he would likely switch to another provider. “It’s a good time to be a consumer.”
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