Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Build it, buy it, hope the customers come, and never mind the cost. That new mantra of India's mobile services companies won't inspire much confidence among their shareholders. But for startups dreaming of making it big in digital music, education or talk shows for 1.25 billion people, the telecom companies are opening up a golden opportunity.

Bharti Airtel, the country's largest wireless carrier, unveiled a three-year, $9 billion network upgrade plan on Monday, just after a $499 million spectrum purchase deal by billionaire Kumar Mangalam Birla's Idea Cellular, the third biggest player by the number of subscribers, and a takeover of Russian tycoon Vladimir Evtushenkov's Indian mobile carrier by billionaire Anil Ambani’s Reliance Communications. 

All three developments were motivated by the entry of India's richest person, Mukesh Dhirubhai Ambani, into a crowded, hyper-competitive industry. 

Before even Ambani launches his fourth-generation broadband service, Reliance Jio Infocomm, rivals like Bharti's Sunil Mittal are being forced to react to protect their turf. And Ambani's younger sibling, Anil, is so fervently hoping to profit from joining forces with his once-estranged brother that he bought out Evtushenkov's 8.5 million subscribers, and even more importantly, his 800/850 megahertz band airwaves.

Fearing he might get left behind, Birla paid 98 percent more than this year's auction prices to acquire one part of the consumer electronics maker Videocon's airwaves. The remaining portion of Videocon's spectrum may also be up for grabs. Bharti may want some, and so might Telenor and Vodafone, especially if the latter succeeds in listing its Indian business next year, buttressing its ability to borrow.

All this frenzy should give pause to equity investors, for whom India's telecom industry has already been one long nightmare:

India's Mobile Misery
Telecom stocks have lagged behind the index
Source: Bloomberg

But the fight for market share that will start now might be the most brutal assault yet on valuations. Jio is lucky. Its parent, Reliance Industries, saw the margin in its core oil-refining business jump to a seven-year high last quarter. If Reliance benefits from Chinese petrochemical demand next year, as Nomura analysts are predicting, it may go for the jugular by increasing its debt, already up 11 percent from a year earlier to about $24 billion. 

That will create challenges for companies that depend on telecom to pay the bills. India Ratings and Research reckons that the spectrum deal with Videocon might increase Idea's $3.4 billion debt by 10 percent or more. Meanwhile, over the next three years, Bharti will invest as much as 37.5 percent of all that it has ever invested in its network, and will take broadband mobile to 500,000 villages. That doesn't mean revenue and profit will keep pace. Currently, only 21 percent of Bharti's 235 million mobile subscribers in India use data, and the company makes roughly 80 U.S. cents more in a month from an average data user than from a voice customer.  Competition from Jio will mean a scramble to keep subscribers, and that could erode the price premium of data services.

Investment and debt will increase even as pricing gets worse. While that's a lousy outcome for telecom investors, it could be a great omen for content startups, which will be able to build scale at the mobile companies' expense. 

It has been hard for content to be king in India because of prohibitive distribution costs. Reliance gobbled up Viacom's India partner, Network 18, last year after rescuing it from high-cost debt. 

Bigger Byte
Mobile Internet is expected to drive India's data use
Source: Deloitte Analysis

The sudden penetration of mobile Internet will give independent content producers a shot at revenge. About 47 percent of all mobile data traffic in India last year came from video and audio downloads and streaming; Deloitte estimates the contribution of digital entertainment content will grow to 74 percent by 2020, by which time it expects data use to have expanded 20-fold.  

It will be a strange day indeed when Indian telecom giants have to console their investors about not being able to monetize the traffic on their expensive networks, and relative pygmies like Tiger Global, and the Liberty Media-funded music streaming service Saavn, start cashing the checks. But content may well be the winner of India's mobile data war.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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Paul Sillitoe at