Delhi.Airtel is struggling to add subscribers in a saturated market after Jio managed to lure more than 30 crore users over the past three years a quarter of the world’s second-largest market. The aggressive expansion of Jio with free calls and cheaper data, backed by the deep pockets of Asia’s richest man, was bad news for highly indebted incumbents engaged in a tariff war that had pushed call rates to less than a cent.
Airtel is struggling to add subscribers in a saturated market after Jio managed to lure more than 30 crore users over the past three years — a quarter of the world’s second-largest market. The aggressive expansion of Jio with free calls and cheaper data, backed by the deep pockets of Asia’s richest man, was bad news for highly indebted incumbents engaged in a tariff war that had pushed call rates to less than a cent.
The New Delhi-based company is counting on some asset sales, a rights issue and an initial public offering in London of its Africa unit to bolster its finances. “Airtel’s profit will suffer until Jio is ready to raise prices. It is hard to say when, but Jio may remain aggressive until it achieves the No. 1 spot in mobile revenue. In the meantime, Airtel is trying to weather through by preserving margin at the sacrifice of subscriber loss, divesting assets to ease debt burden, and raising equity to avoid a credit downgrade.”In an interview with earlier this year at the World Economic Forum in Davos, Mr Mittal described conditions in India’s hyper-competitive telecommunications market as “dreadful,” predicting a possible turning point this year. “This will be the year of perhaps haemorrhaging stopping,” he said.Airtel slipped to No. 2 in the industry last year after Idea Cellular Ltd. and the local unit of Vodafone Group Plc closed their merger to become India’s largest operator by subscribers.
In February, Airtel unveiled plans to raise as much as Rs. 32,000 crore for a war chest to take on Jio as well as to prepare for the 5G auction. Of that, Rs. 25,000 crore will be from a rights issue due to close May 17 at Rs. 220 per share, and the rest from the sale of perpetual bonds with equity credit. Vodafone Ideaproposes to raise Rs. 25,000 crore from a rights issue.