Airtel Fine-Tuning Plans to Tackle Jio Threat
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.