In the other corner is the challenger who has risen to the top position in three years and become the new telecom champion. Mukesh Ambani’s relentless push for subscribers has helped Reliance Jio
grab the number one slot and, with a 35 per cent revenue share of the market, has moved up quietly from the number three slot at the beginning of the year (Q3 FY 19).
But that is not enough for Ambani who wants to push his 350 million customers up to 500 million. At current net additions a month, this could take him 18 months.
If he thinks this strategy will have Mittal on the ropes, Mittal has made it clear that he won’t take it lying down. He hopes to increase Airtel’s revenue market share from 32-35 per cent in some time.
The opportunity for the two men to realise their ambitions will unfurl next year when the finances of the third player, Vodafone Idea which has over 300 million customers, are expected to sink. Given that Vodafone Idea’s promoters have said they are unwilling to throw more good money after bad, it may even shut shop unless the government steps in.
The good news
is that the weakening of Vodafone Idea comes at a time when the brutal price wars of the last three years have subsided. Telcos have already announced hefty hikes in tariffs of 15-40 per cent which they hope will perk up their balance sheets somewhat.
Mittal expects average revenue per user to go up by Rs 200 a month, very near what it was before Reliance Jio’s entry, in the next few quarters and even hit Rs 300.
Yet the financial health of the incumbents (Reliance Jio
has to pay a small amount and is not seriously affected), will depend crucially on how the government and the Supreme Court, which has directed telcos to pay Rs 144,000 crore as past dues, tackle the contentious AGR dues.
While the tariff increases might help to reduce their financial stress, they are nowhere near enough to absorb the huge payout for the AGR dues. That is why Bharti is raising $3 billion in fresh capital which will be a combination of equity and debt to take care of the AGR payments. For Vodafone Idea, analysts say that the tariff hike will need to be 80 per cent for it to cover the AGR payout.
The outcome hinges on the fate of the Bharti Airtel
and Vodafone Idea review petitions against the Supreme Court ruling and on whether the government is ready to stagger the payments, reducing the overall immediate burden. This decision could determine Vodafone Idea’s survival.
Clearly, a further emasculation of Vodafone Idea or its closure would provide an attractive opportunity for Mittal and Ambani. For instance, around seven per cent of Vodafone Idea’s subscribers are post-paid with significantly high ARPUs, constituting around 20 per cent of its revenues, say analysts. Bharti Airtel
will be in a better position to grab them as it has a strong presence in the post-paid business and a lot of plans. In contrast, only one per cent of Jio’s subscriber base is post-paid and that too with only one plan on offer.
Jio, though, has a winner in the 4G feature phone which is on offer for Rs 699 and comes with bundled minutes. It has been a work horse for wooing 2G customers to upgrade to 4G: nearly 30 per cent of net additions come from users who opt for the bundled offering.
Yet both Ambani and Mittal are aware that they have to reduce their dependence on debt even if they are in control. Next year will see a speeding up of the monetisation of assets.
While next year will see a Rumble in the Jungle between Mittal and Ambani, it will not be the year of 5G. Most telcos say that the various financial uncertainties, the limited spectrum available coupled with a high base price, and the lack of any viable use case, makes it unattractive for the time being.