Since 2016, Mukesh Ambani led Jio Infocomm. Ltd. has shaken the entire industry. Before the entry of Jio, consumers had to pay a hefty amount of Rs. 450-500 for every 1 GB of data. However, Jio brought in such a change, which would never have been expected by the beneficiaries of the telecom services.
Jio introduced free 4GB high-speed 4G data. After its inception, it has been reported by Niti Aayog, the Indian government’s think tank, that the Indian mobile data usage has become higher than the aggregate of that of developed countries, USA and China; from 20 crores to 120 crores GB data in the first 6 months itself. The list did not end here. Free voice calls seemed a distant dream for all the Indian citizens, which was made possible by this telecom giant.
The same has led to a price war, between Jio and its competitor, rather the former market leader, Bharti Airtel Ltd., in which consumers are the clear winners, as they are beneficiaries of services that are either free of cost or at a negligible price.
How did all this start?: In September 2016, Jio rolled out an offer of free voice calls and data, for 6 months, which helped it capture avenues from different strata. This led to a huge disruption in the quite stable telecom market. Jio strived for inclusivity at the maximum level in the digital sector.
How did the industry respond?: Jio’s rivals were not left with any choice, but with a standard response of cutting down their tariffs; followed by the merger of the former 2nd and 3rd market leaders, Vodafone and Idea Cellular, respectively. While Bharti Airtel bought the sick units of Tata Teleservices and Telenor India.
However, to sustain Jio’s commendable growth, it had to look after the sector which could not afford 4G compatible phones, and thus Jio counteracted the same by introducing JioPhone, a basic 4G compatible phone, for a mere deposit of Rs. 1500.
Current status?: While Airtel is struggling to maintain its subscribers, Jio has reported around 300 million users, for the past three years. Reduced earnings pose a huge threat to Airtel, as it is already burdened with a humungous debt of $ 17 billion. Airtel posted a net loss of Rs. 2866 crore in the Q1 of 2019-20.
However, not all statistics are against Airtel. It has now shifted its focus to quality and not the number of users; it reported average data usage per month as 11.9 GB, compared to 11.4 GB of Jio. Also, Airtel sticks mainly to revenue-paying subscribers, no matter how less they may be. Its average revenue per subscriber is Rs. 129, compared to Rs. 122 of Jio. This is mainly because airtel has decided to let go of customers who buy plans worth less than Rs. 35 a month.
Airtel recently indulged in a ‘broadband war’ by introducing an Android-based Set-Top Box (STB), to provide digital entertainment and broadband services, as a competition to JioFiber, which offers a free HD TV set, free calls from landline, 100 Mbps to 1 Gbps broadband speed at a subscription rate ranging from Rs. 700-10,000 a month. Also, Airtel may bundle an HD/LED television along with STB as a super-premium pack. This will majorly target middle and top post-paid Airtel users. The STB, called the Airtel Xstream Box, is priced at Rs. 4000. It comes with Airtel Xstream App, with 10,000+ movies and shows, and streaming services of Amazon Prime Video, Netflix, Youtube, etc via download from Google Play Store. The same applies to online games; Jio provides in-built games from various controllers, like Microsoft and Gameloft, while Airtel only allows STB users to download games from Playstore.
Also, Rs. 25000 crore rights issue of Airtel was reported to be oversubscribed, helping it to boost its balance sheet, along with the issue of Rs. 7000 crore perpetual bonds, highlighting the positive sentiment of the investors for the incumbent. It has been reported that these funds will be used by Bharti Airtel for debt repayment and capital expenditure. Along with this, Airtel also raised funds through IPO in its Africa unit, worth $750 million, which was oversubscribed as well. The company plans to use the net proceeds from this issue to reduce its $4 billion debt.
Airtel has also planned to form an infrastructure investment trust (InvIT) with Vodafone Idea, to reduce debt. InvIT helps invite individual or institutional investment in the infrastructure assets (optic fiber), just like mutual funds.
According to me, Airtel requires a huge amount of Capex to be done, due to 5G expansion, lower tariffs because of immense pressure from cut-throat competition from Jio. Prudency in cash management and investment is the key to survival and growth for Jio’s rivals in the current deplorable scenario.
As far as the customers as concerned, they indeed have been the ultimate stakeholders for whom all this war has been taking place between the two leading firms. The cost of data has been at a low of about Rs. 15/GB from a high of about Rs. 250/ GB before September 2016. The buyers have a low switching cost, and they will shift to any of the service providers which gives better quality at a cheaper price. As both these firms have been striving for nothing else but maximum consumers, the buyers have of course been in a win-win situation throughout.