The miracles that Reliance JIO has made so far are completely beyond the expectations of common people. With its very advent into Telecommunications sector, offering free Internet and calls, JIO has proved its best. It has almost been a year now, JIO has lifted the bars so high that its rivals could never breach the same at any cost.
Repudiating the very restrictions its rivals tried to impose, JIO fought fair with the TRAI and sustained in the mobile network market, now has an iron fist in the same. Airtel being the pioneer of the Internet in India has suffered severe losses with the entry of JIO. Incurring unbearable losses, Airtel and other networks managed to hold back its customers by reducing the Internet and call charges deliberately.
Back then, the Official sources from the Airtel claimed that they suffered approximately Rs 550 crore loss in the current quarter due to ‘tsunami of calls’ that originated from the network of the new entrant. The Sunil Bharti Mittal-led firm said Jio’s demand to end mobile termination charges (MTC) is a “sinister design” to “continue with its strategy of predatory pricing and ultimately throttle all competition”.
In a bid to deliver the precise statistics, Airtel headquarters from New Delhi has said: “The allegations made by Reliance Jio regarding Airtel earning excess revenue from MTC are not only false but laughable.
Once for all, Mukesh Ambani has finally opened up on the ongoing issue, gave a mouth-shutting reply to Mittal’s Bharti Airtel, said, “For all of us in the industry, I think profits and losses are risks that we take. I don’t think we can rely on, governments and regulators to guarantee our profits or losses.”
“To me, what is most important is did we move the country forward and does the consumer gain,” Ambani said. “The question… you should be thinking about is even if there are profits and losses, who gains and who loses. And as long as the consumer gains and the country move forward, it is worth taking those losses… Some of us are big boys, we can afford that,” he added.
Now, post these things, with Jio turning things upside down, Mittal’s seat-of-the-pants approach to counter competition comes with significant downside risk, and perhaps making a comeback would not be an option. It’s not certain that his bets will pay off in the long run. But this is a do-or-die situation for Mittal, and Airtel, a telco that he has nurtured for nearly 23 years.
Firstly, Airtel’s long-term survival depends hugely on the future upside in its APRUs. Airtel has seen a sharp deterioration of about Rs 70 in its ARPUs over the past two years. If ARPUs keep falling at the current pace, Airtel might not see the end of this battle. So far, Airtel has no clarity on when the ARPUs will bottom out.
The other big area of concern is the regulatory environment becoming even stricter. The reduction in mobile-to-mobile IUC (interconnect usage charges) rates – from 14 paise to 6 paisa – and termination charges for international incoming calls has badly hit operators like Airtel.
What’s more worrying is that telecom regulator TRAI is talking about slashing the IUC rates for all types of domestic calls to zero by 2020. A significant part of Airtel’s current revenue comes from IUC charges. Airtel and other operators have recently got relief from telecom tribunal TDSAT on TRAI’s telecom tariff order (which is going to hurt incumbents) but that’s not going to put the matter to rest.
In the face of troubles, Mittal has fought his battle with courage so far. As the fight gets uglier and prolonged, his chances of coming out a winner will start to wear off.