We believe that Reliance Jio, being the dominant capacity owner, will dictate pricing in the coming years (constrained only by its execution and handset availability). Holding only 10-40% of RJio’s unused capacity, the incumbents will need to increase their network capacities, quickly.

In a report on network capacities, we had developed a simple framework for comparing network capacities across time, technologies and operators. One of the key conclusions from the analysis was the significant amount of capacity addition coming in from Jio, and the need for incumbents to augment their capacity. One of the pushbacks we get on
our concern from Jio’s launch is that the incumbents talk about low capacity utilisation on their network (25-35%). This gives an impression that they are really not in a hurry to ramp up capacity, and should be comfortable in the near term inspite of Jio’s aggressive entry.

Jio’s unused network capacity is 4x Bharti’s, and 9.5x Idea’s. In an industry where history has shown that operators have negligible pricing power, the pricing is likely to be determined by the owner of the largest capacity, i.e., Jio. It is clear that at price points optimal for Jio, the incumbents’ networks will get flooded. The pace of rise in utilisation is likely to be determined by Jio’s urgency in filling up its own network (working
within its constraints of execution, handset availability, etc).