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Jio-Facebook deal bodes ill for Airtel and Vodafone Idea

The tie-up between the social network and the Indian telco is a further nightmare for other service providers in the country.

Gagandeep Kaur

May 1, 2020

3 Min Read
Jio-Facebook deal bodes ill for Airtel and Vodafone Idea

Facebook's recent purchase of a 10% stake in Reliance Jio will disrupt India's telecom market in a few ways, and not least by adding to the pressure on its other big service providers. (See Facebook places huge bet on India with $5.7B Jio stake.)

Bharti Airtel and Vodafone Idea are likely to face several challenges as a result of the mega-deal. The first problem might be their recent price increases. With such a big infusion of funds, Jio may have less need to lift its own tariffs and decide to continue building market share by cutting prices – bad news for its rivals.

Second, with more than 400 million subscribers, WhatsApp, a part of the Facebook family, has become firmly established as a leading messaging platform in India. Jio can now use that channel to promote its digital services directly to consumers, and not necessarily to its own customers. WhatsApp could be used to engage with subscribers to Vodafone Idea and Airtel. If Jio dangles the usual freebies, even the most loyal subscribers to other networks might might not be able to resist its overtures.

Third, Vodafone Idea and Airtel have continued to focus on commodity connectivity services and solutions. On the other hand, Jio, as a newer service provider, has always been clear about its ambition to be a one-stop destination for all digital needs. It has been developing a range of digital products and today announced that a videoconferencing app called Jio Meet is due to launch. The details were unveiled as it reported sales growth of more than a third for its last fiscal year, to 544 billion Indian rupees ($7.2 billion), and a net profit of INR55.6 billion ($730 million), up 88% on the previous year's result. (See RJio gears up to bring digital life to India.)

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Yes, Airtel and Vodafone Idea have come up with several new-age products, but those have not been the focus. It is here they stand to lose the most. Facebook is perceived to be a young, dynamic brand, and its tie-up with Jio could spur a wave of technology-driven innovation that appeals to India's digitally savvy youngsters.

The two companies say they plan to focus on small and midsized enterprises, as well as micro-businesses. The digital products they create will persuade many enterprises to move to the Jio platform, much to the discomfort of other private-sector players.

Within a few days of announcing the deal, Jio launched its JioMart e-commerce service with an official WhatsApp number in the suburban areas of Mumbai. It is likely to be rolled out across the entire country soon. The current COVID-19 pandemic is forcing businesses to use digital platforms and gives JioMart an opportunity to quickly gain traction.

Airtel and Vodafone Idea need to start innovating to defend their market share, and stop merely reacting to Jio's product development. If they don't, the industry might turn into a monopoly sooner than they realize.

— Gagandeep Kaur, contributing editor, special to Light Reading

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About the Author(s)

Gagandeep Kaur

Contributing Editor

With more than a decade of experience, Gagandeep Kaur Sodhi has worked for the most prominent Indian communications industry publications including Dataquest, Business Standard, The Times of India, and Voice&Data, as well as for Light Reading. Delhi-based Kaur, who has knowledge of and covers a broad range of telecom industry developments, regularly interacts with the senior management of companies in India's telecom sector and has been directly responsible for delegate and speaker acquisition for prominent events such as Mobile Broadband Summit, 4G World India, and Next Generation Packet Transport Network.

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