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Disruptions in Data, Cloud and Telecom Industry


The Indian Telecom sector has been severely disrupted by the entry of the conglomerate, Reliance, through its offering Reliance Jio. As if the sector was not already reeling under the combined impact of a brutal price war between the incumbents, Airtel, Vodafone, Idea, and Aircel, there is now the added aspect of intense competition engendered by the launch of Jio.

Firstly, let’s take a look at the Telecom Industry in India:

  • World’s 2nd largest telecommunications market with an estimated 1,161 million subscribers as on March 2019

  • 70% of the population lives in non-metro, non-urban areas and is not fully data enabled

  • New National Digital Communications Policy 2018 will set the tone for full digitization path

  • Increasing consumption of data and media on mobile networks

We can contemplate the growth and opportunity in this Industry through the following graphs:

Source: Reliance Industries annual report 2019

In the first graph, we can clearly see an opportunity gap which is prevailing in the Industry. With rural mobile penetration of 57.1%, we have only 25.4% Rural internet penetration. Thus there is a ready market of users for Internet services. In Graph 2, we can see exponential growth in Internet data usage over the years. Much of which can be credited to the disruptive entry of Reliance Jio. Indeed, it can be said without any hyperbole that Reliance has changed the game very much with its offering of free voice and discounted data packs along with its provision of a “basket of services” complementing and supplementing the base mobile and Smartphone telephony. What more, it is also offering handsets as part of “bundled services” wherein users can have the device as well as the service.

Cloud Computing

Cloud computing refers to the provision of software, storage and computational power to customers from remote data centres through the internet. The concept of Cloud has been around for two decades but has now become mainstream with the growing presence of “hyper-scale” Cloud providers in big data, analytics, artificial intelligence and IoT. The Indian Cloud market has a large opportunity for growth, as the Cloud becomes more lucrative for the Indian SMEs, Enterprises and as the global demand for Cloud grows to provide India opportunity to emerge as a significant consumer and supplier, leveraging its cost and other advantages.

  • Cloud spending in India expected to touch USD 2.5 Bn. by end of 2018, and only 1.3% of global Cloud spending

  • Additionally, in 2018, Cloud spending is expected to be ~6% of the total IT Spending

  • The growth rate of Cloud spending in India is 2nd highest in the World at 40.2% (CAGR) over 2016-18, second only to China

  • Over 13% of India’s workloads are expected to be moved to Cloud driving up the adoption of Cloud

Reliance Jio Infocomm is likely to trigger another wave of price disruption – this time with its plan to roll out affordable cloud-based solutions for small and medium enterprises in partnership with Microsoft, which will also boost the country’s data centres business, analysts said.

Reliance Industries Ltd. chairman Mukesh Ambani said recently that its telecom arm would offer SMEs a combination of Microsoft cloud solutions with connectivity at Rs 1,500 a month – effectively a tenth of the current cost of similar services. It plans to do so by leveraging its upcoming maze of data centres across the country that will run Microsoft’s Azure platform. RIL has said its upcoming data centres running Microsoft’s Azure platform would arm all Indian businesses with the capacity to speed up their digital transformation and be globally competitive. This is since small businesses would have access to enterprise-grade voice and data services, video conferencing, security solutions, marketing and sales solutions and more productivity tools. More so, since the Jio-Microsoft partnership plans to also develop solutions for all major Indian languages and dialects.

Has the Indian Telecom Sector always been disrupting?

The Indian Telecom sector has always been disrupting itself in the same manner in which the Global Telecom Sector faces renewed bouts of periodic disruption due to the emergence of new technologies. For instance, when the Second Generation of wireless technology or 2G as it is known was launched, many expected that this would last for a few years before the next generation emerges. However, 2G quickly turned into 3G and was followed by 4G which is now being upended by a possible 5G rollout in the next few years.

With all these trends, it is hard for Telecom Providers to keep pace with so many changes and that too in such a short time frame which entails them to upgrade their infrastructure and technologies constantly. Thus, it can be said that the Global Telecom sector is a place where “change is the only constant”, and this is a reality that all Telecom Majors worldwide have to keep in mind when developing and actualizing strategies.

Our take ‘Speeding Tiger and Lumbering Elephant’

Global Telecom Sector is threatened by obsolescence of the hardware wherein the constant release of Smartphone handsets with newer versions being released every few months makes it difficult for them to plan ahead for determining the compatibility and interoperability of the handsets with their infrastructure.

The Indian Telecom sector has to deal with the added challenge of having to bid for expensive spectrum now and then and that too when such spectrum auctions are “tainted” by allegations of corruption and crony capitalism. Indeed, this is such a pervasive problem in India that many Global Telecom Majors often hesitate to enter the market. In addition, they are also put off by the changing governmental regulations which sometimes take the form of “retroactively” changing the Tax Laws which regulate the Mergers and Acquisitions. With so much happening so fast, it is no wonder that many experts liken the Global Telecom Sector to be a Tiger in search of its prey whereas the underlying foundation is like an Elephant that is lumbering slowly.

What the solution to the above problem?

The above problem has resulted in some industry incumbents to go on a merger and acquisition spree as their thinking is that unless they have the necessary financial muscle and the resources bandwidth, they would be unable to maintain their operations. In other words, the Global, as well as the Indian Telecom majors have concluded that they must be Financially Big to undertake the necessary investments as well as have the size in addition to having the resources or the physical bandwidth to add more virtual bandwidth

Is the Indian Telecom Sector still Attractive?

Yes, the Indian Telecom Sector is one of the fastest-growing sectors in the world with nearly a Billion consumers making up for a diverse but also a fragmented market where smart strategies can help them become market majors.

Moreover, with the Chinese Telecom Sector stagnating with all the capacity having been “absorbed”, Global Telecom Majors view India as the Next Frontier in their “Great Game”. This is the reason why many Telecom Multinationals, as well as Smartphone makers such as Apple, are keen to set-up base in India and with the current business-friendly government; they are also attracted by the possibility of rebates and favourable laws. Moreover, the government with its Make in India Policy is also encouraging them in this regard and hence, it would be fair to say that despite the many disruptions, the Indian Telecom Sector remains an attractive market which is like a Cheetah waiting to take off and record galloping rates of growth.

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