Air­tel Fine-Tun­ing Plans to Tackle Jio Threat

The Economic Times - - Companies - Anan­dita.Manko­tia@ times­group.com

New Delhi: Su­nil Mit­tal-owned Bharti Air­tel is fine-tun­ing plans to tackle the loom­ing threat posed by Re­liance Jio In­fo­comm, owned by In­dia’s rich­est man Mukesh Am­bani. Key to the No. 1 telco’s strat­egy is to ring-fence the top 11% of its users con­tribut­ing around a sixth of its rev­enue through spe­cially di­rected of­fers and dis­counts, based on ev­i­dence that high-pay­ing users rarely exit un­less ser­vice is truly abysmal. It’s been tak­ing a sharp knife to waste.

Peo­ple aware of Bharti Air­tel’s strat­egy said the car­rier will fo­cus on re­tain­ing the tenth of cus­tomers who are typ­i­cally high users of data with an av­er­age rev­enue per user (ARPU) of over .₹ 200 a month. Th­ese sub­scribers have been iden­ti­fied by the com­pany as most vul­ner­a­ble to poach­ing by Jio. Air­tel can iden­tify their de­vices and us­age pat­terns, based on which it will make cus­tomised of­fers. “This way, we can con­tain the con­ta­gion of pric­ing,” one of the peo­ple said, ask­ing not to be named.

The re­main­ing 89% of Air­tel’s 250 mil­lion sub­scribers ei­ther have fea­ture (ba­sic) phones or are those who use smart­phones for calls and not data ser­vices. Hence, they aren’t re­garded as be­ing un­der im­me­di­ate threat from Jio, which is ex­pected to go af­ter the pre­mium data cus­tomers of in­cum­bents, the per­son sa- id. Jio is ex­pected to launch by the end of the year. “We would com­pete head-on in some places and we wouldn’t in some,” said an­other per­son. The strat­egy was a short-term one, given that this seg­ment would ex­pand each year as more users move up the value chain. But if the com­pany’s strat­egy suc­ceeds and can be repli­cated each year, then “you are okay,” the per­son added.

The method is one that Air­tel is said to have em­ployed suc­cess­fully against Te­lenor In­dia, a re­gional player that’s highly com­pet­i­tive on price in the six cir­cles it op­er­ates in, an­other per­son said.

In­cum­bent car­ri­ers, in­clud­ing Air­tel, have been pre­par­ing to fight a pric­ing on­slaught by Jio over pre­mium data cus­tomers since free or cheap voice ser­vices are given on both sides con­sid­er­ing the low rates be­ing of­fered cur­rently in the mar­ket.

CLSA ex­pects Jio to be able to churn away some 80 mil­lion 4G cus­tomers over two years, mainly from the top three tel­cos — Air­tel, Voda­fone In­dia and Idea Cel­lu­lar — which could be around 16% of data users.

But an ex­ec­u­tive said, that based on his com­pany’s ex­pe­ri­ence, high­ARPU sub­scribers don’t leave un­less ser­vice is re­ally bad, a view that was backed by an­a­lysts. “The high-end con­sumers would un­likely move to Jio if they get a good-qual­ity data net­work from in- cum­bents… de­spite Jio hav­ing some dif­fer­en­ti­at­ing fac­tors such as bet­ter fi­bre con­nec­tiv­ity and abil­ity to of­fer free voice (Vo-LTE),” Bank of Amer­ica Mer­rill Lynch said in a re­cent note.

An­a­lysts added that Air­tel was best placed among the top three to take on Jio, hav­ing gained a head start with its 4G of­fer­ings, which are al­ready avail­able in over 450 ci- ties and towns across 15 cir­cles.

Be­sides, the car­rier now has a panIn­dia 4G data spec­trum foot­print af­ter buy­ing air­waves from Video­con and Air­cel, thus match­ing Jio’s hold­ings. The de­lays in Jio’s com­mer­cial launch mean­while have been help­ing ex­ist­ing play­ers. “We may not have launched 4G this soon hadn’t it been for Jio. But the de­lay is giv­ing us time to roll out our net­works,” the first ex­ec­u­tive said. Still, plans could come un­stuck if Jio starts sub­si­dis­ing and bundling de­vices along with its con­nec­tions, some­thing that Air­tel won’t match. But the ex­ec­u­tive doesn’t ex­pect Jio to take that route.

“If they sub­sidise the de­vices, say to .₹ 1,000 per de­vice, then 70% of th­ese de­vices will find their way into Viet­nam, Africa and China. So that is a huge call to take as this hap­pened last time and they (Re­liance) lost a cou­ple of bil­lion dol­lars,” the ex­ec­u­tive said. “We don’t think they will do that.”

He was re­fer­ring to the ‘Mon­soon Hungama’ plan launched by Re­liance dur­ing its ini­tial tele­com en­try in 2003 when it gave away mo­bile phones for .₹ 501, to go with any tar­iff plan that a user chose. Re­liance hasn’t di­vulged any de­tails re­gard­ing its launch strat­egy. The Jio threat has also helped Air­tel turn into a much leaner or­gan­i­sa­tion, strip­ping waste and con­trol­ling costs, said the peo­ple cited above.

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