Reliance Jio, RCom set to dethrone Vodafone as king of Mumbai

RCOMReliance Jio and its partner Reliance Communications are all set to emerge as the strongest wireless connectivity provider in Mumbai and at least eight other circles, going by the latest regulatory filing by RCom.

The Anil Ambani company today told the exchanges that the government of India has approved a plan by the two companies to pool each of their 800 MHz spectrum blocks in nine circles to form a mega network.

These circles are Mumbai, UP(E), MP, Bihar, Odisha, Haryana, HP, Assam and North East.

To realize the implications of the move, we can take the example of Mumbai, which has been facing extreme data shortage for several years.

Vodafone is by far the most dominant operator in the city and according to some estimates, Mumbai alone accounts for nearly half of the profit of the operator from India.

Part of the reason is historical, as Vodafone has a long history in the commercial capital of India, starting out as Orange, continuing its journey as Hutch and ending up as Vodafone.

In comparison, its biggest competitor today, Airtel, was hamstrung by the absence of suitable spectrum in the circle right from the beginning. The Sunil Mittal company entered the circle late and had to be content with the low-penetration 1800 MHz spectrum.

As a result, while Vodafone’s signals were available everywhere, Bharti faced a problem with ensuring indoor coverage in Mumbai’s thickly-populated concrete jungle. It resolved much of this problem last year when it finally launched on the 900 MHz band, but by then, Vodafone had entrenched itself into the market.

JIO-RCOM TO BE KING

But if Vodafone was able to dominate the market with just 5 MHz of 900 band spectrum in the voice era, its position in the upcoming data-centric world threatens to be totally different.

In data, Vodafone has only about 26 MHz of spectrum (including up and down channels) in Mumbai, out of which 10 MHz is utilized for 3G.

Out of the 26 MHz, only 13 MHz is available for downlink traffic as the other half is reserved for uplinking due to the FDD technology used by Vodafone.

Besides the meager quantum, the important thing to note is that this entire data spectrum is in the 2 GHz band (1.8 GHz and 2.1 GHz).

Spectrum that has a frequency higher than 1 GHz tends to bounce off walls instead of penetrating inside them — one of the major reasons why Airtel was not able to challenge Vodafone in the Mumbai market with its 1.8 GHz spectrum.

Now contrast this with the situation of Reliance Jio and RCom.

According to today’s regulatory filing, Mumbai is one of the nine circles where both parties will pool their 850 MHz spectrum.

This means that there is a total of 20 MHz of 4G spectrum in the 800 MHz band at their disposal.

Add to this, another 10.8 MHz in the 1800 band, 10 MHz in the 2100 band and 20 MHz in the 2300 band and the total comes to 60 MHz, out of which 50 MHz is for 4G and 10 MHz for 3G.

In pure extent, the Jio-RCom combination have over twice the high-speed data spectrum that Vodafone has.

The situation becomes even more stark if you look only it 4G spectrum. Here, Vodafone has only 16.4 MHz, while Jio+RCom has 50 MHz — or three times as much.

But the biggest problem that Vodafone faces is not even the size of the holdings, but its frequency. Out of Jio-RCom’s 50 MHz, 20 lies below the 1 GHz mark, while Vodafone has nothing in this band.

It is this sub-GHz spectrum that will prove to be big advantage that the new combine has compared to the market leader.

Just like Vodafone drove out everyone else with its 900 MHz spectrum in the voice service, the Jio-RCom combine could decimate the incumbent with its 800 MHz 4G offering that will be available inside and outside buildings equally.

Across India, the Jio-RCom service will be the only one to have a 4G service in the sub-GHz bands, giving them an incredible edge over rivals such as Bharti and Idea.

ALL IS NOT LOST

However, all is not lost for Vodafone, and coming in the shape of a white knight this time is the government.

The government will put up for auction an estimated 70 MHz of very-high-penetration 700 MHz airwaves next month.

Though the price is very high, nobody doubts that Vodafone will buy 10 or 20 MHz  of this spectrum at least in its key circles like Mumbai. This will once again even the scales, as the 700 MHz band can go even further inside the buildings than can the 800 MHz.

Besides, Vodafone will be able to almost immediately start work on rolling out the 700 MHz network as the spectrum is lying unused and can be handed over quickly, though some bureaucratic delays cannot be ruled out.

Still, a 700-MHz powered Vodafone network cannot be a reality before the end of this year, and during this six months, the RCom-Jio combine could drive home their advantage by building a solid reputation for consistency and high speeds.
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