Author(s): Raghu Gopal
Reliance Jio's launch of cellular services in 2016 has disrupted the Indian telecom industry, growing at an unprecedented pace. Jio gained 130 million subscribers after only 12 months, or more than 10 percent of the market. The incumbent operators including Airtel and Vodafone have seen their profits and market shares dwindle. They have cried foul and lobbied the government to alter the rules of competition, but Jio has continued to alter the mobile landscape in India.
And matters look even more uncertain as Jio keenly targets a new segment of the market. After attracting smartphone users in record time, it's now aiming to gain 500 million users of feature phones with its low-cost JioPhone. As the heavily indebted industry readies for another round against Jio, rivals have been looking for ways to stem the tide of subscriber losses with innovative packages.
Jio's competitors have been forced to adapt, and have tried to approach its punchy prices. However, it's been nearly impossible to be profitable based on the operator's current business model: during its first six months of service, Jio didn't charge for LTE data and offered free voice services for life. And although it started charging for data in April 2017, it offered much lower rates than the competition.
The operator isn't just about connectivity, but also content. Its online video services, JioTV and JioCinema, are among the most widely used streaming apps in India.
Jio's success in this area has driven Bharti Airtel, India's largest mobile operator, to make an ambitious $500 million bid to secure digital media rights for Indian Premier League (IPL) cricket matches. IPL is wildly popular in India, in a similar way to the Premier League in the UK or the NFL in the US.
Airtel's attempts to gain IPL rights shows that it needs a serious strategy shift to keep and gain mobile subscribers that it has been losing to Jio. Airtel's initiatives in content so far have largely focused on sprucing up its music streaming app, called Wynk.
After the auction, Star India, a 21st Century Fox subsidiary, was awarded the exclusive television and digital rights to Twenty20 cricket matches for IPL. The five-year deal, which starts in 2018, cost Star India a mammoth $2.55 billion. In addition to Airtel, Facebook, Yahoo, Atlanta-based Yupp TV and even Jio were also bidders.
The bidding frenzy underscores the importance of India's huge market, and in particular, the importance of cricket. The sport is a major draw for sponsors and advertisers, which often plan product launches based on the schedule of major cricket tournaments. Advertising slots have to be booked far in advance. Cricket enthusiasts, and there are a lot of them in India and around the globe, have been able to watch live matches on their smartphones thanks to online video services.
Airtel's failure to secure the rights to IPL matches was a blow to its strategy of packaging must-watch TV content with its connectivity services. The operator's shares fell 4 percent after it lost its bid to broadcast the matches, which would have given it an exclusive angle in a market that is otherwise commoditised.
Airtel hopes to compete against Jio on service quality as it plans its own voice-over-LTE (VoLTE) services. VoLTE offers greater call clarity by using the 4G data channel for voice. Jio is an LTE-only operator and thus has always offered so-called high-definition voice service.
By rolling out VoLTE, Airtel hopes an improved quality of service will place it in a stronger position against Jio and others. Call quality isn't a replacement for top cricket matches, but it has been a problem for Airtel for years and subscribers have been demanding better service. VoLTE does require phones to be compatible with the service, and feature handsets as well as older smartphones are unlikely to support it. According to CCS Insight's latest forecast, 50 percent of the handsets sold in India in 2017 will be LTE-enabled (see Market Forecast: Mobile Phones, Worldwide, 2017-2021).
Although India's mobile operators couldn't secure IPL content, the bids highlight the changing mobile market in India. Like in other countries such as the US, operators are adjusting their strategies to build their brands beyond connectivity. Content is an increasingly important variable in differentiating between service providers.