Jio’s entry has forced Indian MNOs to write off up to $50bn, says Airtel

If the cablecos of the US and Europe are trying to emulate Free Mobile’s disruptive effect in France (see previous item), their real role model may be seen in India, where Reliance Jio has already boasted of faster uptake rates than Facebook, and has forced the established MNOs to write off investments worth between $40bn and $50bn.

Bharti Airtel’s chairman Sunil Mittal made this estimate, blaming the prolonged launch period in which Jio was offering free or heavily discounted services, pushing the other MNOs to cut their own prices, and to demand that the regulator, TRAI, should take action to protect them.

In an interview with India’s Economic Times, Mittal said that if a company in the US or Europe pursued the same strategy as Jio, regulators would intervene to stop “predatory pricing” (though French operators might beg to differ).

However, Mittal had some causes for optimism in the interview, welcoming the rapid  consolidation that is currently taking place in India, partly as a reaction to Jio’s disruption – although the proposed merger of Vodafone and Idea Cellular would overtake Airtel’s market lead and its share of 24% of connections.

Another reason for MNOs to think the worst may be over is a proposal from TRAI to relax restrictions on spectrum ownership and help boost operators’ financial health. The regulator says that the current cap on owning more than 50% of a given band in any one telecoms operating ‘circle’ should be axed. This would be replaced with a cap on holding more than 50% of the combined spectrum in the three sub-1 GHz bands (considered the most desirable for their propagation qualities) in any given circle. Those bands in India are 700 MHz, 800 MHz and 900 MHz.

TRAI is also proposing to raise the overall spectrum cap on owning more than 25% of any spectrum in any circle, boosting it to 35%.

Such measures would bring relief to the debt-laden operators, argues TRAI, having held a consultation with the industry on the topic earlier this year. Raising spectrum caps could make it easier for mergers, such as that of Vodafone and Idea, to pass regulatory scrutiny without significant divestments being forced. It could also help Airtel to make its own acquisitions.

Unlike Vodafone and Reliance Communications (which has acquired SSTL but been blocked from buying Aircel), the market leader has, until recently, stuck to smaller purchases of regional players like Tikona, or selected spectrum assets such as those from Aircel and Videocon.

However, Mittal hinted in his ET interview that it might be interested in Aircel, now the RCOM deal is off. “Whenever there will be a possibility of a conversation, I have no doubt, we will be a part of that conversation,” Mittal said with reference to Aircel, and acknowledged that “conversations have taken place in the past”. Airtel has been tipped to buy Aircel’s customers, but not its 400,000 towers, which are likely to be sold separately as part of the wave of deals to consolidate or sell off the Indian operators’ tower assets.

Airtel was also recently rumored to be interested in certain spectrum and fiber assets belonging to RCOM, which is looking to sell off some of its holdings in order to reduce a debt mountain of about $7bn. And last month, the operator agreed to buy Tata Group’s consumer mobile business, which includes spectrum and customers in 19 circles; while it is in the process of acquiring Telenor India.

Jio may also be in the race to acquire RCOM licences, especially if those in the coveted 850 MHz band come onto the market. RCOM is reported to be preparing to shut down many of its mobile activities, starting with voice services from next month.