Through all the fur that’s been flying around ever since Reliance Jio launched its services in September 2016, it is difficult to escape the conclusion that the existing market leader Bharti Airtel was simply not prepared for the ferocity and the intensity of the churn it would trigger.

Reliance Jio’s entry was no surprise. Indeed, the repeated delays in the launch of its services, gave Bharti as well as the other rivals more time to batten down the hatches. Over the last six years, Reliance had made its intentions quite clear, first acquiring the broadband network needed to roll out 4G services and then buying a pan-India spectrum.

Indeed, Bharti of all companies already had a taste of what a behemoth like Reliance would mean as a competitor. Reliance’s objective in 2016, as it was in 2002, is to grow the size of the market exponentially and to make money from the ensuing volumes. In 2002, Reliance Infocomm succeeded in opening up the Indian market by crashing prices all the way from Rs8 per minute for incoming calls to less than Re1, with incoming calls and value-added services thrown in free.

Within a fortnight of its launch, Infocomm had a million subscribers. Strangely, at that stage, Bharti was a small company lacking in the resources to counter such a capital-intensive battle. But the telecom market of 2017 is vastly different from the one in 2004 that Reliance Industries chairman Mukesh Ambani was forced to quit. In these intervening years, Airtel has been the leading market player with a share of over 30%. But being big can sometimes be a handicap.

Companies with high market shares in their industries have actually been more vulnerable than would seem—IBM, Gillette, Eastman Kodak, Procter & Gamble, Xerox, General Motors and Caterpillar are some of the companies which lost big to new entrants. The classic case is that of Pan American World Airways, popularly known as known as Pan Am, which was the largest international airline for nearly 70 years since it began operations in 1927. But hit hard by the deregulation of the US airline industry and its failure to come up with a viable domestic network led to a steep and precipitous fall leading to its final bankruptcy in 1991.

What Reliance Jio has done, at great cost it must be said, is to move into all those spaces that were either left vacant or were just not visible to incumbents. Free voice as a part of a package where a customer is already paying for data, seems in hindsight an obvious facility. What’s more, by plumbing for an all-data strategy, Jio also seems to have read the changing requirements of Indian customers better.

In a statement in February, Ambani claimed India had become the world leader in mobile data usage with Jio users consuming more than 100 crore gigabytes (GB) of data per month. That’s borne out by numbers from market regulator Telecom Regulatory Authority of India (Trai) which shows that the entry of Jio in September 2016 led to a sharp rise in data volumes. Even though that is being attributed to Jio’s free offers, what is clear is the latent appetite for data usage in the country.

While there is no guarantee that Jio’s market share will lead to commensurate profits, given the massive investments it is throwing behind its many free schemes, it has forced Bharti along with other companies into matching offers. The dynamic would have been vastly different had Airtel chosen to make the same offers a year ago when Jio’s position was relatively uncertain. Now, it is Mukesh Ambani who’s calling the shots, forcing the erstwhile market leader into playing catch-up.

Of course, Jio is leveraging the strong balance sheet of its promoter and analysts are right in questioning the viability of such a scorched-earth policy in the long run. But those analyses are based on seeing the market as it is today. What if, as happened a decade ago with voice, the Indian market for data explodes? Jio’s tariff tactics may end up looking quite smart. In any case, it isn’t the first company to use competitive pricing to gain market share. One of the most successful examples of the use of pricing against competition came from an incumbent, Frito-Lay. In the 1980s, under attack from beer-maker Anheuser-Busch’s newly launched snack foods under the Eagle Brand, Frito-Lay struck back with deep across-the-board price cuts eventually forcing the newcomer to capitulate and in 1996 sell off its plants to Frito-Lay and the Eagle snacks brand name to Procter & Gamble Co.

The Jio vs Airtel war is just beginning and it is too early to speculate on the winner. But in the early rounds, it is the underdog who has notched up the first points.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.

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