Business Case Study: How Airtel is beating Reliance Jio?

Business Lessons from the Airtel - Jio Rivalry

Dec 02, 2021

2016, a year which no Indian would forget due to demonetization. But, another major event happened that year that shook the entire telecommunication industry, i.e., the launching of Jio by Reliance industries. While we, the consumers were enjoying the newfound luxury of the internet. On the contrary, it was a dread to the rest of the telecom companies. Their stock prices came down, several giant companies shut down. The crowded telecom space of India now seemed like a deserted battlefield with only a few players left. But throughout this brutal telecom war, there was a company that stood still, and that is none other than Airtel.

Airtel not only survived the hurricane brought by Jio in the market but, was also able to move one step forward to surpass Jio in many key areas. As of January 2021, Airtel was able to add 300% more wireless subscribers as compared to Jio. In fact, as of February 2021, Airtel is the top telecom company in terms of active subscriber market share.

What is so special about Airtel-Jio's rivalry? How are they so far ahead of other telecom companies?

Although this war is just getting started, considering the state of companies like Vodafone and Idea, the above question arises.

The answer to this question lies in one of the most powerful business strategies in the 21st century which is known as the “Product Service Ecosystem”. This is a business strategy that was introduced by the legendary businessman Steve Jobs, CEO and Co-founder of Apple Inc.

It is a method where the company tries to place its products so strategically into the lifestyle of consumers that over the new course of time, the customer ends up buying the products from the same brand or find it extremely difficult to switch to another brand.

Now, to understand it in the easiest way is to understand how Steve Jobs created an ecosystem for apple users. Now, this ecosystem of Apple primarily consists of three types of elements.

First is the Entry-Level products.
Second is the Retainers.
Then thirdly, we have got the Upsells.

And, depending on your own personal requirement, you will end up with all three of them in different ways.

For example, if you buy an iPhone, which is an entry-level product, then you will start using facetime and iMessage that is when you are making an investment in the form of chat and filesharing. And because you can’t get your iMessage on android. Your habit of iMessage and your chats act as retainers that make you cling to Apple.

Why would you stick to iPhone just because of a few chats and just one app?

Well, there are 2 reasons.

Firstly, chat conversations are more important to us than we think.

Secondly, it is not just one app, there are multiple apps that you will invest into and that will push us to stick to Apple. Some of these apps include the apple podcast recommendations or apple podcast plus and even professional camera apps like FiLMic pro etc.
So, depending on who you are, once you get a hang of these retainers, the upsell happens.

In this case, if you’ve got an iPhone 10, you are more likely to buy an iPhone 13 this year. Why? Because, your phone might have outdated, but you still want to hold on to your investments which are in the form of iMessage, fitness track, and most importantly, the habituation of user interface.

This is the magic of the three elements of the Apple ecosystem, i.e., Entry products, the Retainers, and the Upsells.

And, if we observe very carefully about the happenings around ourselves. It can be clearly noticed that Jio and Airtel are no longer just telecom companies but an entire digital ecosystem under construction and they want to place their products and services in some of the most crucial aspects of your life. And this is a billion-dollar business war that is hidden in plain sight and here’s how it works out.

When you buy a Jio sim, you also get offered JioTv, when you will buy a Jio broadband connection, you will also get a setup box as an extended offering at a very cheap price. Today, when you will buy a Mi TV, you will also get a JioFi connection. So, if we see, we don’t just buy a product, you buy into Jio’s ecosystem itself. This is how Jio is establishing its first layer of the ecosystem by easily placing its entry-level products in an easily accessible manner. Now, the most crucial reason why Airtel survived is because Airtel realized the importance of the ecosystem, and they started pivoting to building an ecosystem faster than any other player in the market.

How did Airtel transition to building an ecosystem so quickly?

It turns out that Airtel had already done a phenomenal job with its existing services. Back in 2016-17, their DTH service was one of the strongest contenders in the market along with Tata Sky with a market share swinging between 20-25%.

Secondly, they had a very strong hold over enterprise services which is Airtel's most profitable business venture that contributed 14% to their consolidated revenue in 2020.

Thirdly, Airtel was already delivering a far better service to its customers as compared to the rest of the competitors.

And last but importantly, the foundation for Airtel broadband was already laid in 2017 itself wherein they had 21 lakh connections in place. Now, if we compare this with the rest of the competition, it can be clearly seen that they were severely lagging in multiple aspects as compared to Airtel. Vodafone and Idea did not have a significant DTH presence at all, Videocon had a good DTH presence but did not do well with the mobile users. Thirdly, Tata Sky was a market leader but Tata Docomo was a failure. But this is where Airtel took some very bold steps to hit a home run.

Airtel went on to a shopping spree to start acquiring smaller players like Videocon telecommunications in 2016, Telenor, and tata teleservices in 2017, and this gave them 2 major benefits, it brought them more spectrum and it prevented Jio from acquiring these companies and cornering Airtel.

Secondly, they decided to narrow down their focus down only to high-value customers and they imposed a minimum recharge limit. As a result, Airtel lost 4.8 crore users in the December quarter of 2018 itself. But this ended up saving them a ton of resources and improve their profitability. Last and most importantly, they started integrating their services to build an ecosystem just like Jio.

They started offering a set-top box with a broadband connection and giving access to additional services like Wynk music and here’s where the game started changing.

When a company starts integrating multiple products into its ecosystem. Apart from customer retention, the ecosystem strategy gives the brand 3 dazzling superpowers.

Firstly, it offers multiple challenges for the brand to penetrate into the lifestyle of the customers and to present entry-level products, i.e., if an iPhone fails, Apple can always come back to you with a MacBook Pro.

Secondly, it gives you the superpower of using the loss leader strategy and this is a technique to sell low margin products at a loss in order to get customers to buy a high margin product.

Third and most importantly, it gives you the opportunity to break into your rival’s ecosystem. Guess what, this is what exactly happened during the pandemic and Airtel used all of its superpowers to break into the Jio ecosystem.

What was so special about the pandemic?

Well, as we all know, pandemic skyrocketed the demand for high-speed broadband connections, because of major lifestyle changes in the consumer life in the form of work from home and education from home. Here’s what happened,

Airtel used its first superpower of existing b2b enterprise clients and offered all the companies to provide all their employees with a high-speed broadband connection and along with it, it also spent a ton of money and rapidly partnered with local cable operators and offered them lucrative incentives to lay their line even in tier 2 and tier3 cities and they started acquiring these broadband customers as soon as possible. Therefore, it could not give out a free sim card to get into a customer’s lifestyle, Airtel used broadband as an alternative and positioned it as an entry-level product to get customers into the Airtel ecosystem.

During the pandemic, work from home and education from home culture started.

When it offered the customers broadband connections, it also came with an additional offering with something called the Airtel extreme set-top box, which gave you one month of DTH HD pack free with PrimeVideo and Disney plus, Hotstar even at the base level plan. So, what is Airtel doing over here, it is using its second superpower of the ecosystem strategy, i.e., the loss leader strategy.
Last and most importantly, by executing these Strategies very well, Airtel successfully placed its products even in those households which already had a Jio sim. That means it has started breaking into Jio’s ecosystem.

In 2020, the number of broadband subscribers grew by 95 lakh. While Reliance Jio ended up capturing 17 lakh subscribers, Airtel, on the contrary, ended up capturing 70 lakh subscribers, which means a large number of these people has also been offered DTH service and even an Airtel sim card. Even in the wireless segment, Airtel is catching up very quickly beating Jio regularly by a large margin.

In January 2021, Airtel added almost 59 lakh, wireless subscribers, whereas, Jio, on the other hand, was able to add only 19.5 lakh new wireless subscribers. And that is a growth rate difference of 300%. This is how Airtel is being a trojan horse in the Jio ecosystem and while all eyes are set on Jio, there is a chance that Airtel could actually end up doing something miraculous especially with its combative integration strategies like the Airtel black.

What are the business lessons that we can learn in order to apply to our businesses?

In this digital world that we live in, we will more often than not find 2 types of products, that are standalone products and ecosystem products. So, from the business standpoint, we need to see how we can build an ecosystem of our products in order to cater to your customer because this will eventually help you to avoid a major threat competitor and from the investor’s standpoint, you need to keep an eye on these companies and you should try and understand how these ecosystems are being created because that’s will help you pick the winner before the public finds out.
As of now, both Airtel and Jio have built only entry-level products and they are both yet to have strong retainers in place. So, always remember while entry-level products give you the customers, only the retainers and upsell can drive exponential revenue growth. So, keep an eye on how both of these companies are building their retainers in order to upsell their products.
While Airtel is just confined to telecom, broadband, and DTH, on the contrary, Jio seems to be building a much bigger ecosystem for itself with services like Jio mart, Jio health, JioKrishi, and many more.

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