Adani's Telecom Ambitions
Gautam Adani, now the wealthiest man in Asia, has had an eventful couple of years, increasing his wealth from $8.9 billion to $105 billion. And he's not going to stop soon! The Adani Group has recently made several news stories due to the company's versatility and growing need for development in numerous sectors.
The company's recent significant announcement was the purchase of ACC Cement and Ambuja Cement from the Holcim group. With this, the firm entered the cement sector. According to the company, it did this to enhance the exposure of Indian cement to the whole construction industry and get cement for developing its business line at reasonable pricing. And now, the company's development into a different industry is the news topic. The telecom industry!
Adani Data Networks, a new Adani Group company, will participate in the government's 5G spectrum auction for the telecom industry. And it is the first time Adani and Ambani will engage in a direct conflict. But this auction will put both the billionaires in front of one another.
Analysts view the group's decision as the first step toward a potential full-fledged entry into the telecom sector. There are three significant telecom firms in India: Jio, Airtel, and Vodafone Idea. Given the financial state of Vodafone Idea, Airtel and Jio effectively have a duopoly in this market. Amid fierce competition in this market, the Adani Group is attempting to undermine all these businesses' monopolies.
Adani's foray into the telecom industry would strengthen its position in other sectors where it already has investments, including education, port management, airports, and others. The Group will create private networks using the spectrum to run its operations out of its ports and airports. The auction will take place on July 26, 2022. The validity of the right to use spectrum will be 20 years.
Will Adani' venture in the 5G Spectrum race disrupt the telecom sector?
The introduction of Jio to the fragmented industry with no dominant figure in 2016 caused a shift in the Indian telecom sector. It used a deceptive pricing model and offered free phone calls and 4G internet at cheap rates to start a nationwide data revolution.
With Adani Group's unexpected entry into the spectrum bidding, analysts are forecasting the same disruption, increasing competitiveness in the forthcoming auctions and the 5G space. Adani has recently won the majority of bids in various industries, which might worry established carriers like Jio, Airtel, and Vodafone Idea. The stage is set for competition.
Adani's participation is sure to create uncertainty over spectrum pricing in the 5G auctions, where it was anticipated that RJio and Bharti Airtel would be the leading competitors.
An intensely competitive environment has plagued the industry for the last two decades. According to Motilal Oswal, the idea of a new entrant in the sector causes investors to get anxious about the next round of severe competition that could obstruct the ongoing pricing improvement and market share gains in the telecom sector.
There is no simple solution to the Adani Group's venture into the telecom industry. But one thing is inevitable despite all the uncertainties. Adani's arrival will have an impact, but it is to be seen if it will be like Jio's disruption in the past
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