In recent years, India’s main operators have been too preoccupied with the challenges of their own huge market, and with surviving the pandemic, to be highly active in other markets. Vodafone Idea, of course, is part of the global Vodafone group (for now at least) but is run in an arm’s-length way by its UK-based majority parent. Bharti Airtel has operations in Africa, having acquired businesses in 15 countries from Zain in 2010, but it has sold some of these to Orange.
But there are more ways than one to assert scale and influence beyond one’s borders, and Reliance Jio and Airtel are both active in international initiatives, many connected to the emergence of new network architectures, such as O-RAN Alliance. Both are developing their own 5G-centric network platforms and ecosystems, and Jio, in particular, may seek to turn this into a broader industry offering rather as Rakuten has done with Symphony.
There are also signs that Reliance Industries, the parent of Jio Platforms (which contains Jio itself plus several technology companies), may be looking for more direct footholds beyond India. Last week, Reliance was rumored to interested in taking a significant stake in UK incumbent BT, having failed to buy T-Mobile Netherlands in September.
In recent months, Patrick Drahi, the chairman of French telecoms group Altice, has been considered the frontrunner to take a controlling stake in BT, but despite statements from Reliance that it was not planning a bid, speculation has continued to mount.
In response to an article in India’s Economic Times, Reliance said: “The article is completely speculative and baseless.”
That may suggest that Reliance is not immediately planning to compete with Drahi for control of BT, but many sources suggest it is interested in some kind of involvement, as part of a strategy to gain a foothold in Europe. One option might be to form a joint venture with BT’s wholesale fiber arm, Openreach, to help fund its massive expansion of fiber-to-the-home, although BT recently said it had decided a funding partner would not be needed as its finances have recovered.
Drahi, who already holds a 12.1% stake in BT, which makes him the largest shareholder, is expected to increase his holding, and even take full control, when UK stock market rules allow this (from December 11 this year).
Another telco whose shares in BT may be in play is Deutsche Telekom, the second largest shareholder with a 12.06% stake. CEO Tim Hoettges has said he is evaluating the future of assets such as the BT stake and DT could be in the market to offload this.
It seems clear that, even if BT is not the right target, Reliance is looking for a European asset or two. In September it was in talks with T-Mobile Netherlands, but was beaten by private equity firms Apax Partners and Warburg Pincus, which acquired the operator from DT for €5.1bn.
Any deal would give the disruptive mobile and digital services arm of Reliance, Jio, its first foothold in Europe and that could send shivers down some MNO spines in the region. It is unlikely that Jio could replicate the approach or the success it has had in its home country in the more mature and fragmented European region. However, a stake in one country could be just a first step towards building a larger European base and seeking to harness open architectures, digital services and elastic pricing to challenge the established players.
Operating companies are likely to come up for sale in various markets over the next few years as telecoms groups look to higher growth regions, and seek to exit countries where they have limited market share or profitability. In the past, consolidation has sometimes been slowed down by regulatory hostility to deals that reduce the number of MNOs in a market (as in the UK, where an O2/Three merger was rejected), but acquisitions by an external player would not raise this concern.
French telecoms group Iliad has shown how it is possible to disrupt incumbents and seize market share even in western Europe’s saturated and competitive markets. It did this most spectacularly in France with the launch of Free Mobile, but is also achieving some success in Italy. Now another broadband provider, Drillisch, is trying to emulate Iliad in Germany, where it has launched an MNO called 1&1. In an earlier era, Hutchison entered Europe from Hong Kong with a string of launches under the ‘Three’ banner and has become a challenger operator in six countries in the region.
These disruptors had certain elements in common, notably the use of the most modern, legacy-free architectures to reduce cost and maximize agility, enabling the operators to undercut incumbents on price and then, having gained market share that way, to add new layers of services, content and marketing differentiation.
Jio, coming from the toughest market on earth in terms of ARPU and margins, knows all about this process. It could import the cloud-based, open network platform that it is developing and apply it to European acquisitions, while also turning them into digital services providers, modelled on the Jio template at home. Many smaller European MNOs state the ambition of being digital service providers, but few have had much commercial success in this field.
A foothold in Europe would also give Jio Platforms an enhanced ability to influence pan-European technology developments, whether standards work within ETSI, or working with the burgeoning European Open RAN community. It would be able to extend its work on Open RAN and 5G architectures to target other operators in Europe, and even to emulate Rakuten by selling its platform and services to MNOs. Given the European Union’s eagerness to stimulate a homegrown ecosystem, that would be easier from a base within the region.