Game On: Why Jio Vs Airtel Battle Is No Longer Looking Like A One-Sided Affair

For those who thought the battle for telecom supremacy between Airtel and Reliance Jio was going only one way, you have another thought coming: in recent months, it is Airtel that is gaining momentum.

To be sure, Jio continues to be the market leader by far in terms of subscriber base (408 million versus Airtel’s 334 million in November 2020, according to regulator TRAI), and is an overwhelming winner in broadband services (market share 55 per cent versus Airtel’s 23.5 per cent). But for four months running (August to November 2020), it is Airtel that is gaining more subscribers than Jio. In November, Airtel added 4.37 million new subscribers, while Jio added less than half that number, 1.93 million.

More worrying for Jio, its active subscriber base is much smaller than Airtel’s, at less than 80 per cent compared to the latter’s 96.63 per cent. Adjusted for inactive users, Jio’s active user base of 338 million is not significantly more than Airtel’s.

This difference also shows up in Airtel’s average revenues per user (ARPUs), which is at Rs 166 against Jio’s 151. After six straight quarters of losses, in the third quarter of 2020-21 (October-December), Airtel returned to the black, though its India operations continue to be under stress. The India operations will, however, be contributing to the bottomline once ARPUs hit Rs 200 in a few months’ time.

How did Sunil Mittal’s Airtel change the story? There can be several reasons why, including the steady decline of financially weak Vodafone, and also Jio’s own inability to grow subscribers fast enough after it withdrew sales of its low-priced featurephone bundled with data some months ago. This situation may change if Jio is able to bundle a new cheap smartphone, being developed by Google, with its tariffs once more later this year, but we have to see how that pans out.

After what seemed like a lethal blow, Airtel returned to the fight some time in end-2019, when it summoned up the courage to end the bruising price wars with Jio and upped tariffs. While this helped all players, including Jio, it was Airtel that showed that it can be a price leader once more.

Since then, it has demonstrated two other initiatives, the first one being the live demonstration of 5G services in Hyderabad last December. Jio announced that it had its own home-grown 5G technology at the last annual general meeting of Reliance Industries, but it was Airtel that was first off the mark. One can be sure that when the 5G spectrum auctions are held in fiscal 2021-22, Airtel will not be slow to launch its services.

The second big initiative is strategic, and mirrors Jio’s own fund raising plans. In mid-2020, Reliance roped in major international investors, including Facebook, Google, Qualcomm, and several others, by giving them a 33 per cent share in Jio Platforms, which includes Jio telecom, Jio Mart, Saavn and all other apps and services bundled together. This helped Reliance become a net zero-debt company by end-2020.

Now, it is Airtel’s turn to monetise its assets, and it is doing so by separating its digital assets (which include Airtel Payments Bank, its dish TV assets, its fibre-based broadband services, etc).

In an interview to The Economic Times, Sunil Mittal said the plan would be to create a holding company with two different businesses, one being a pure telco, and the other housing all the digital services, including the payments bank which could morph into a small finance bank when the Reserve Bank of India allows it.

Selling stakes in the digital business will allow Bharti Airtel to raise the resources needed to retire debts. In Q3, Airtel reported that its annualised net debt was more than three times EBITDA (earnings before interest, tax, depreciation and amortisation); but it is down from 3.4 times in December 2019.

In his interview, Sunil Mittal is quoted as saying, “Financial services is going to be the next important area of business for telcos. I believe that Airtel Payments Bank is a multi-billion-dollar opportunity.”

The moral of the story is that one cannot underestimate Sunil Mittal’s ability to hold his own against Mukesh Ambani. A bit of history tells you why: in the first decade of this century, Mukesh Ambani entered the telecom field with Reliance Infocomm, based on CDMA technology and low tariffs. But India had already taken to GSM technology in a big way, and CDMA failed to make waves. Net result: Reliance Infocomm, which went to Anil Ambani when the brothers parted company in 2005, went down the tubes. Mittal won the first battle.

Luckily for Mukesh Ambani, he got a second chance with Jio. He has already done pretty well, and pushed the other telcos to the wall, including Mittal’s Airtel. But Mittal is fighting back, and is most likely to hold his own. It’s game on. This was never going to be a walkover for Ambani.