Why Hitting Jio Under The Belt Is A Bad Strategy For Airtel & Co.

The swing is evenly balanced now – between Jio and the senior boys, but it will be increasingly difficult for the older operators unless they devise some strategies that the new generation wants, and in a way they want; and not by denying PoIs or port outs

Airtel-jio-bad-strategy

Since the official launch of Reliance Jio services on 1 September, India is perhaps witnessing its worst telecom war. Never in the past there was so much resistance to a new operator as seen in the Jio case. Indian telecom space has traditionally been open to competition and perhaps that was the reason more than 12 telecom operators served the country at one stage. But it was hitherto unheard where the incumbent operators are using tricks like not providing enough point of interconnects (PoI) or not allowing numbers to port to a different network, as seen in the case of Jio where operators like Airtel, Vodafone and Idea are allegedly resorted to.

However, this strategy of the senior boys of Indian telecom, is turning out to be a disaster.

But, Why This Resistance Now, And Not In The Past?

When new operators entered Indian market in the past, be it MTS, Uninor (now Telenor India) or STel, the incumbent operators like Vodafone, Airtel, RCom or Idea Cellular have welcomed them and behaved as business competitors. There may have been instances where telcos deployed strategies to zip past each other or acquire customers or executives from the rival firms, but most of the time it was by innovative business and marketing strategies. Hitting under the belt was hardly a strategy, as is seen in stopping Jio from running its operations smoothly. But why the big telcos resorted to these tricks now and not in the past?

Its because the big boys were never threatened a by a newcomer. For over a decade, the operators list from the top read Airtel, Vodafone, Idea and RCom, and it has been the same till now. And each of these operators had accepted the status quo. In an organic way, neither Airtel would have ever thought it will come down to Vodafone’s place nor the latter have ever hoped it can take the top position. Idea and RCom also share the same sentiments for themselves and about the top two too.

But Reliance Jio disturbed the status quo. Even the largest operator is threatened by the entry of a startup who had once failed in the telecom business in the past.

Why Are The Incumbents Scared?

There are enough reasons to be scared. First, the telcos like Airtel, Vodafone and Idea are loosing the perception game – that people of India are thinking Jio can eat big chunks of these telcos’ market share. This perception started building since the day Mukesh Ambani announced its entry into telecom business six years back. And this perception only got stronger with each passing year and with every development at Reliance Jio. Telcos, too, responded to every development at Jio with change in their business strategies, bringing out innovative tariff plans, and offering freebies.

Second, the amount of money that RIL can pump into the new business. Mukesh Ambani, India’s richest man, had already invested upwards of $20 billion in Jio – more than the revenues of top 2 operators of FY 2016 put together; and the company has said it will invest much more than this to create a world class integrated telecom services business. The top three operators do not have the deep pockets anymore to invest in their business at this scale. Airtel’s quarterly net income is less than a billion now, though its on a growth path for the last 8 quarters.

The biggest advantage for Jio, being a green field operator, is putting its money in new technologies, whereas the incumbent telcos have the legacy issue. Jio claims to have world’s largest all-IP network.

Third but the most vital factor is the scary business plan of Reliance Jio. On its launch day Jio said it will offer voice calls for free, for life. That was shocking for the industry. Revenue from voice calls, so far, has been the mainstay for telecom operators, for the likes of Airtel, Vodafone and Idea. They earn close to 70% of their revenue from voice business. On a simple note, telcos stand to lose 70% of their revenue to Jio because of this strategy only. Then, the data plans. Jio’s data plans are cheaper by 5 times. Besides, Jio is offering something that has been lacking on other telcos’ menu so far – content. The company is offering content in the form of movie, songs, games, education, news, TV and mobile money through its services, that too in an integrated manner. Other telcos offer these, but not all, in bits and pieces.

What The Incumbents Should Do?

Should they loose hope because India’s richest man is threatening them in their own turf? I suggest, no. Rather, they should resort to strategies that would work in their favour now, denying PoIs or port out certainly don’t feature in them. Reliance Jio has everything to fight this battle out but it does not have one thing that the incumbents have – subscribers. The entire game is for that, apparently! What the old telcos need to do is to do everything that is needed to retain their customer base.

These telcos are sitting over a huge pile of user data generated over the years. They do have the insights of the customer behaviour and demands. Now is the time these huge data should be put to use. The telcos like Airtel should bring out innovative tariff plans, offer the best customer experience, and offer customised services for its 200 million customer base in the country. Convergence of services has remained one big issue for Indian telecom operators. A house hold having multiple services from one service provider is still getting multiple bills and it appears these service units are still working in silos. Vodafone and Idea are poor in content. These two operators need to come up with some content strategy that helps its customers to stick to the service provider. Vertical specific content, say, agriculture, education and health are some of the areas where there has been a great demand from the customers, and where Vodafone has global expertise and experience.

For the incumbent operators like Airtel, Vodafone and Idea Cellular, this is going to be a game of survival, and the fittest only survives. The swing is evenly balanced now – between Jio and the senior boys, but it will be increasingly difficult for the older operators unless they devise some strategies that the new generation wants, and in a way they want.

Also Read

Leave a Reply

 
%d bloggers like this: