Baba Ramdev enters telecom: Can he master this aasan?

After making a dent in the revenue of FMCG companies like Hindustan Unilever and Dabur, Baba Ramdev's Patanjali is planning to test waters in the highly competitive telecom sector in collaboration with the State-owned Bharat Sanchar Nigam Limited (BSNL).

The telecom sector is bleeding for some years, especially after the entry of Mukesh Ambani-owned Relinace Jio, which introduced unlimited voice calls and almost 1 GB internet data per day for a price as low as Rs 100 per month.

Imitating the strategy of Jio, Ramdev also plans to first launch its mobile services through Swadeshi Samriddhi SIM card for only Patanjali employees.

Who should feel threatened?

Since the entry of Jio, practically there are only a few players left in the telecom sector- Airtel, Vodafone-Idea and Relaince Jio. Though a few other players like Tata Docomo and Reliance Communications are also present but they have a miniscule market share compared to the main players.

Out of the big 3 companies (Vodafone and Idea are merging) only Reliance Jio is growing in terms of both revenue, profit as well as customer base. The Mukesh Ambani-led Jio has achieved it on the back of few policy changes that have gone in its favor- especially the decision to reduce the interconnect usage charge (IUC) for voice calls to 6 paise a minute from 14 paise a minute earlier.

The Trai decision had evoked sharp criticism by the incumbent large players including Airtel, Vodafone and Idea who used to earn a significant revenue from higher IUC.

What happens with Patanjali's entry?

Since 2014 under the Modi government Ramdev’s Patanjali has received more than an estimated $46 million in discounts for land acquisitions in states ruled by the BJP, according to a Reuters report. Apart from this, an order issued by the Ministry of Finance in 2015 defined yoga as a “charitable purpose,” has allowed Patanjali to save million of dollars in taxes.

Since Patanjali is selling the idea of Swadeshi and has close links with the ruling establishment, it is possible for the company to get invest thousands of crores in creating a new company that offers freebies to expand its business. In 2016-17, Patanjali had reported a 111% rise in its turnover to Rs 10,561, up from a turnover of Rs 5000 in the previous financial year, which was a 150% rise over 2014-15.

Though the company's growth was hit in 2017-18 due to the implementation of GST, there is no doubt that the meteoric rise of Patanjali will continue so long as it gets the administrative and policy support from the ruling government.

Though the telecom sector is a very high investment business- Jio had invested more than $20 billion just to launch its telecom services and continues to expand its war-chest to grow in the sector - Patanjali is unlikely to be daunted by such investment requirements given the backing of the incumbent government and the power of the Swadeshi brand that has captured the imagination of the masses in India.

The question at this juncture that one needs to ask is, after telecom, what next? Would it be e-commerce for the yoga guru?