Duopoly catches up in food delivery space as Zomato acquires Uber Eats

The Uber Eats deal helps Zomato to catapult to the number one slot, leaving market leader Swiggy slightly behind.

If the telecom industry runs the risk of becoming a duopoly, the fast growing $4-billion online food delivery space has already turned into a two-horse race. Cab aggregator Uber India’s sale of its food delivery business on Tuesday has clearly set the stage for a Zomato versus Swiggy play.

The signs of consolidation were already there as losses piled up. Last year, Uber India’s rival, Ola, which had earlier acquired Foodpanda, closed down its online food delivery business to move into cloud kitchen services due to aggressive competition.

Seven months later, there’s no room for a third entity in the fight for domination.

In an all stock deal, Uber will get a 9.9 per cent stake in Zomato. According to analysts, the value of the deal is in the region of $350-400 million.

RedSeer data shows that revenues have seen significant growth—up to 150 per cent in 2019—in the food delivery business. But, losses have hit the roof. In many cases, the losses surpass the revenues.

The huge discounts to acquire customers, clubbed with high delivery costs and aggressive promotions, have caused the bloodbath. Even so, the customer numbers are impressive, helping in the subsequent funding rounds.

Indeed, cash strapped companies have always looked for fresh funding to continue to grow. For instance, in the case of Uber Eats, India made up for more than 3 per cent of its global gross revenues in the last three quarters and it already grabbed 12 per cent of the market share. At the same time, around 25 per cent of Uber Eats’ global losses came from India in the corresponding period.

Profitability, a goalpost for investors, has been a mirage in the food delivery business. Even Zomato, backed by Alibaba, has been struggling to make money with its losses rising tenfold in March 2019 to cross the Rs 1,000-crore figure. Its revenues in the same period soared 188 per cent to Rs 1,397 crore.

Company News

Explained: Is mobile tariff hike by Airtel, Vodafone Idea justified?

Telcos have reduced their tariffs so much that they earn only Rs 75 per user per month, nationally.

From the first week of December, Airtel and Vodafone-Idea are expected to raise their tariffs, and users will need to pay more. But is the tariff hike necessary? Telecom companies don’t have too many options.

Almost every Indian has a mobile phone now, though all do not use data. This has resulted in an explosion in data consumption. An average Indian now uses 10 GB data per month.

This is a direct result of the price war between Reliance Jio and the two incumbents. 

Telcos reduced their tariffs so much that they earn only Rs 75 per user per month, nationally and across the industry , for all the data that we use: From streaming YouTube videos and video calls over WhatsApp. Leading telcos quote their ARPU above Rs 100, owing to their own calculations.

Mobile data has become so affordable that an average Indian pays only 0.6 per cent of his/her monthly income on it . But things have been tough for telecom companies: They ended up paying Rs 1 trillion over five years on spectrum charges and licence fees. This does not include what Airtel and Voda-Idea need to pay as dues.

Further, for better quality data and voice calls, they need to invest in more towers. India has one tower for nearly 3,000 people, worse than most Asian peers

Tariff hike, however, may not pinch consumers much. A 15 per cent hike would require consumers to pay nearly Rs 15 more per month, but would make company finances more sustainable

Business Standard

Bharti Airtel, Reliance Jio, Vodafone Idea oppose free spectrum to railways

Reliance Jio said the Railways should not be permitted to offer commercial services like Wi-fi and voice and video communication.

Bharti Airtel, Reliance Jio, and Vodafone Idea have in tandem opposed allocation of the premium 700 MHz spectrum to Indian Railways for Wi-Fi and signaling purposes, citing the commercial value of such airwaves and their potential to earn revenue for the government.

The industry has said spectrum allotted to the Railways for captive use should not be utilised for commercial services for passengers (Wi-Fi and internet offerings) as such services should be kept for entities that hold a valid licence.

Reliance Jio said the Railways should not be permitted to offer commercial services like Wi-fi and voice and video communication, without obtaining authorisation under the Unified Licence. It should obtain spectrum for commercial use via auction like all other interested parties.

“We do not agree with the Indian Railways demand for reserving 15 MHz spectrum in the 700 Mhz spectrum band for LTE (long term evolution) based communication corridor. The spectrum in the 700 Mhz band should not be allocated to the Railways for radiocommunication systems between train and trackside (RSTT) due to its commercial use and being a backbone band for 4G-5G services,” Reliance Jio said in its response to the regulatory consultation paper.

Suitable allocation for such captive use should be in the 450-470 MHz spectrum band, it felt.

“The department of telecom (DoT) has rightly noted that considering the limited spectrum available in the 700 MHz band and the fact that this digital dividend spectrum has immense potential for coverage in wide and rural areas, the spectrum for Indian Railways may be explored beyond this band and that the spectrum in the 450-470 MHz seems most suitable for this purpose,” Jio said.

The operator, however, termed as “valid and legitimate”, the Railways’ requirements to provide mission-critical passenger safety services and applications, video surveillance through close circuit cameras in trains, along with video analytics.

“The Railways is a commercial organisation and it can very well take the requisite licences and auction acquired spectrum to offer commercial services like Wi-fi... to its customers under the applicable licence and service terms and conditions,” Jio said.

Business Standard

Data tariffs stabilise after 2.5 yrs, Airtel pips Jio in monthly data usage

An India Ratings report claimed that Bharti Airtel has overtaken Reliance Jio in average monthly data usage at 11 GB per user.

The proportion of data subscribers to the total subscribers has increased rapidly for Bharti Airtel and Vodafone Idea with increase in broadband customers and growing data usage.

The data subscribers inreased from 28-33 per cent in Q1FY19 to 41-44 per cent in Q4FY19.

At the same time, the share of broadband (3G+4G) increased to 31-33 per cent in Q4FY19 from 17-22 per cent in Q1FY19.

An India Ratings report claimed that Bharti Airtel has overtaken Reliance Jio in average monthly data usage at 11 GB per user.

While this augurs well for future revenue growth of the telcos, analysts feel that revenue recovery may continue at a slower pace as prorpotion of high average revenue per user (ARPU) subscribers in the data and broadband categories are low at 40-44 per cent and 30 per cent respectively at the moment.

The green shoots, however, are visible as data tariffs have stabilised since February 2019 after falling steadily for the last two and half years.

However, Reliance Jio's data tariffs remain at a discount of 25-30 per cent to incumbent telcos.

This has helped Jio to continue to garner market share, indicating that the competitive pressure has not yet subsided.

Business Standard