No one thought it could happen. Then it did. 

In August 2020, Bharti Airtel, India’s second largest telecom operator beat Reliance Jio, its largest rival, on a vital metric: net subscriber additions. It added nearly 2.9 million subscribers in August compared to Jio’s 1.86 million.

Everyone thought it was an aberration. That Jio had temporarily suffered a blip. But Airtel has continued to beat Jio on net subscriber additions every month since then.

But Airtel was still number two, they reckoned. Jio was still the undisputed leader. Until Airtel’s active subscriber base crossed Jio’s in October. Active subscribers refers to the percentage of a telecom network’s users who are considered revenue generating, as opposed to those who may have expired or become inactive.

But India is a large market, they argued. Since telecom was effectively now a duopoly, surely Airtel and Jio could both continue growing? But then, Jio’s active subscriber base fell by 3.45 million subscribers in January.

Since barely pipping Jio on active subscribers in October, Airtel today has amassed a lead of 11.25 million over its larger rival. Airtel had 335.7 million subscribers in January compared to Jio’s 324.5 million.

Let that sink in. India’s “number two” telco Airtel has 11.25 million more active subscribers than its “number one”, Jio.

You’re thinking how that makes sense. 

It does, if you look at the last metric that Airtel hasn’t managed to snatch away from Jio—“total subscribers”. Because on that count, Jio towers over Airtel with a lead of over 66 million. With 410.7 million total subscribers, Jio is way ahead of Airtel’s 344.6 million.

But what if Airtel doesn’t want to beat Jio on total subscribers? What if its content with staying at “number two”, but with more active subscribers generating more revenue?

That isn’t conjecture, but Airtel’s audacious plan that it has been executing to a “t” since late 2018, when it voluntarily culled 50 million of its low value subscribers.

Losing the “number one” crown to Jio after 15 years forced Airtel into understanding the fact that only paying and active subscribers matter. Its rivals could tout “total subscribers”, but it would no longer play that game.

This is why Airtel’s ratio of active to total subscribers is 97.4%. In contrast, Jio’s is a mere 79%. Even Vi, the perennially underperforming telco borne of the marriage between Vodafone and Idea, is at a healthy 89.6%.

And what is Jio, the market leader, doing to counter Airtel? 

The company that was complaining to regulators last year about rivals conspiring to keep data prices too low has had to deal with the reality of its subscribers migrating to rivals when it increased its own data prices. 

In January, it made voice calls to any network free of cost for users. A new plan offers subscribers a free phone with specific tenures.

What do analysts think about this disruptive offer? Not much.

In the previous edition of this newsletter, Arundhati wrote about Netflix’s clampdown on shared user accounts. After years of accepting password sharing as a reality of online streaming, Netflix is now testing a feature that asks users to verify that they’re part of the same household as the primary account owner.

Source: Twitter

To get a feel of why Netflix may be considering this move, we included a survey for the readers of this newsletter. The survey, with over 400 responses, is an indicator of what potential upside Netflix may be targeting.

Nearly half of the respondents agreed to using someone’s shared password. 

That’s high! 

For perspective, in the US market for Netflix, it is estimated that between 20-30% of users use shared passwords. 

We can’t say we’re surprised, though. India is known to be a value-conscious market and Netflix is priced significantly higher compared to other popular streaming services in the country. 

Let’s say Netflix goes ahead and blocks password sharing. This would mean that these users who used a shared password now have a choice. 

Subscribe to Netflix independently. Or move away from Netflix altogether. 

 This will impact two metrics primarily:

1. Average Revenue Per Paying User or ARPPU—how much revenue a user contributes to the business each month
2. Number of paying users—how many users contribute any revenue at all each month

#2 is what Netflix is after. Each new subscriber that Netflix gets is likely to contribute somewhere between Rs 350-400 (US$5-6).

#1 is what Netflix is willing to risk. When users are not able to use shared accounts, the need for simultaneous access will reduce. And with that, so will the added revenue for higher tier plans that allowed this access. 

But while ARPPU would reduce somewhat, it’s unlikely that a lot of subscribers will downgrade their plans. 

For one thing, higher tier Netflix plans offer Full HD access; the lower tier plans don’t. For another, inertia makes people stick to the status quo. It is unlikely that the ARPPU reduces more than Rs 35-40 (~ US$0.5) or 10% in the worst case. This is based on a simple calculation about how the split of users across plans changes after Netflix enforces this change.

So it all boils down to the simple equation. If Netflix loses 10% revenue per user, can it make up for that loss with a 10% increase in new subscribers?

Our readers sure think so.

As a follow up question, we asked readers who use a shared Netflix password if they would subscribe independently in case the service prevents them continuing with the shared password. 

Over 22% of readers said they would start paying for their own subscription if Netflix stops them from using a shared password.

It’s turning into a high-stakes battle between India’s central bank, the Reserve Bank of India and the bond markets. Bond yields—the returns that investors demand from the government bonds—are inching up, because of fears of higher inflation. The RBI has been trying to put a lid on this rise since it increases the cost of borrowing for the government. We’re written about this before here.

On Friday, there was some drama. 

For the first time ever, a government of India bond maturing in 2021 was seen trading in the market for a negative yield of 1.5%. Meaning, if you would’ve bought that kind of a bond, you would’ve received less than what you paid for it on maturity. So you’re paying the government for the privilege of borrowing from it instead of the other way around. 

But this was seemingly accidental. 

BloombergQuint reported that, 

And that’s the most likely explanation for the trade as well.

But—and there’s always a but—an Economic Times report said,

Which means that earlier, an order with a negative yield wouldn’t be accepted by the system even if a fat finger inadvertently caused it. So the RBI did allow for a change in the system’s functioning. 

That’s extremely interesting because you see, on the same day, the RBI put out a 152 page bulletin, which had two very interesting lines.

I’m not making that last line up. Here’s the bulletin in its entirety. 

(In one line, the RBI mentioned a dance form—tango—that originated in the lower-income neighbourhoods of Latin America and another—tandav—that’s a divine dance form in Hinduism.)

Source: Giphy

It was a pat on RBI’s back and a flowery message to tell the buyers of the bonds that the RBI was keeping an eye on the bond market vigilantes driving yields higher. 

The vigilantes are a section of the market who short-sell the bonds without owning it, betting that the prices of the bonds will fall, and yields rise (bond price and bond yields have a negative relationship).

Okay. So, imagine if the fat-fingered trade was actually the RBI, through a proxy, sending out a message that if these short-sellers get too cocky betting for prices to fall, the RBI could create a situation where the price rises sharply instead and squeeze the short-sellers. That way it wields greater control over yields. 

It sounds too far-fetched but we’ve seen the extent to which central banks can cut interest rates and print money. And now they’re trying their hardest to cap yields. This could be another form of ‘doing whatever it takes’, a phrase that’s dear to central bankers.

PS: Does the short-squeeze remind you of GameStop?

Imagine spending US$69 million on a digital art piece, presenting yourself to the media as an eccentric patron of the arts with a touching rags-to-riches story. And then turning around to make yourself, the artist, and the investment firm you run, even more money off of that transaction.

The Straits Times, 20 March

Indian-born, Singapore-based crypto entrepreneur Vignesh Sundaresan, who also goes by the name Metakovan online, seems to be succeeding with this, somehow. The story of how Sundaresan, the artist Beeple, and Metapurse, a crypto-based investment firm, are linked in this scheme is an incredible rabbit hole I invite you to go down at your own risk.

At the bottom of it, though, you’ll be rewarded with this insight: