One late October morning in New Delhi, the head honchos of India’s top three private telecom companies walked in together for a premier mobile technology conference. The bonhomie between them—Reliance Jio’s Mukesh Ambani, Bharti Airtel’s Sunil Bharti Mittal, and Vodafone Idea’s Kumar Mangalam Birla—was hard to miss. Ambani put his arm around Mittal as they went up to the dais for the opening session of the India Mobile Congress to join Birla. Later, Ambani was unusually chatty as Birla listened intently.
But beneath the cheeriness lies an intense business rivalry. The three telecom giants are fighting a brutal battle for the top spot in the ₹1.5 lakh crore Indian telecom market, where the competition has been so fierce that several once-successful companies have either been forced to shut shop or been bought out altogether. And at the heart of all this lies a bruising price war unleashed by Reliance Jio which shook the industry to its core by offering free calls and dirt-cheap data when it entered the market in September 2016. “We want to offer the best services at the cheapest prices and make it affordable to every Indian,” Ambani said in his speech at the mobile congress.
Jio’s impact was almost electric. Thanks to its rock-bottom rates,suddenly, everybody from office attendants and security guards to school and college students was streaming Bollywood films and cricket matches without a care about the cost. Merely two years after its launch, it has signed up 252 million subscribers as it pounds ahead with its plan to corner half the revenue market share by 2021. That sounds like an ambitious target considering it only has around 25% of the country’s total 1,166 million mobile phone users at the moment and long-time market leader Airtel has clung to the second spot with 329 million subscribers. But Jio has the financial muscle and, more crucially, the staying power to help it nudge its way up.
The industry got a taste of it soon after Ambani launched Jio, his second telecom venture,two years ago. Several players like Telenor and Tata Tele services decided to sell off their businesses, while others like Anil Ambani-led Reliance Communications sank under a mountain of debt. In two years, the number of players in the industry shrank from nine to just four, including state-owned Bharat Sanchar Nigam Ltd (BSNL). The carnage wrought by the fight for market share led the then No. 2 player,
Vodafone India, to post losses of $4 billion and eventually merge with the No. 3 player, Idea Cellular, to create a new entity Vodafone Idea, the biggest player in the business today. After the shake-out, the three main players—Ambani, Mittal, and Birla—together control sector assets worth over 5 lakh crore and are expected to sink ₹50,000 crore each year to expand their businesses. “You can say that the silver lining in all this is the painful but quick consolidation which has left the market with fewer players like in more mature markets.Now capital and resources can be deployed more efficiently by the sector unlike when there were a dozen players,” says Cellular Opera-tors Association of India (COAI) director general Rajan Mathews. A fierce advocate of the established players, Mathews was sued by Reliance this year for defamation as the COAI issued press statements questioning the legality of Jio’s entry into the business.
Nobody expects the shake-out to end the tumult in the industry.As the battle rages on, the market dynamics of the three players are also constantly changing. Jio’s adjusted gross revenue (AGR) from licensed services edged past Airtel’s in June, making it the second largest player by revenue, according to Telecom Regulatory Authority of India (TRAI) data. In the next quarter ended September, Jio became the biggest in terms of AGR, going past Vodafone Idea too. Also, Reliance Jio posted its biggest spike in customer acquisition and a hefty profit, while Airtel posted its biggest ever quarterly loss in its domestic operations. Vodafone Idea has been rapidly losing subscribers and its losses are also spiraling fast (see table). With the rapidly changing industry, Anil Ambani, who ended up selling his business to his brother, remarked that Indian telecom was likely to end in a monopoly, given Jio’s onslaught. “Last year at our AGM, I had commented on the headwinds facing the mobile sector. Had predicted that the sector was rapidly moving towards a situation of an oligopoly or even a monopoly,” he said in September.
