By Chiranjivi Chakraborty and P R Sanjai A decade after storming into the Indian telecom market with free calls and cheap data that decimated its rivals, Mukesh Ambani’s digital venture is aiming for a historic milestone this week with India’s largest-ever initial public offering.

But unlike in the triumphant fall of 2016, when its aggressive strategy stoked a price war that left only a single competitor profitable, Ambani’s upstart is coming to the market more cautious and humble. Jio Platforms Ltd., the owner of India’s largest wireless operator, is seeking a valuation that’s roughly 10% lower than its nearest sector rival, Bharti Airtel Ltd.

The listing marks billionaire Ambani’s return to the capital market after 20 years, an offering that he said will “unlock great value” for parent Reliance Industries Ltd. But a closer look paints a more sobering picture. Reliance shares are on track for their worst annual performance since 2011 and the energy-to-entertainment conglomerate had to prune Jio’s valuations to attract marquee investors.

It’s a reflection of the roller-coaster ride for the nation’s telecom sector, which features some of the world’s cheapest data plans and a massive user base. Jio’s market value adjustment shows that the market is saturating fast and investors now prefer companies that earn more from each customer over those that service more subscribers.

“We believe that, following its listing, Jio will likely need to demonstrate growth to public shareholders,” Nomura Holdings Inc. analysts Bineet Banka and Abhishek Bhandari wrote in a note dated Oct. 10. They added that Bharti Airtel remains their top pick in the sector “due to its higher proportion of premium subscribers, which should insulate it from downtrading and subscriber attrition” if telecom services get costlier.

Jio’s IPO opens its books for retail investors on Wednesday, for a subscription period that ends Oct. 23. Anchor investors including BlackRock Inc., Fidelity Management & Research, Capital Group and Allianz SE took stakes worth a combined $854 million at the top end of the marketed range.

Jio’s $3.1 billion share sale values the company at $107 billion at the top end of the marketed price range of 1,065 rupees to 1,119 rupees apiece, compared with about $123 billion for billionaire Sunil Bharti Mittal’s wireless operator.

On paper, Jio is bigger than Bharti Airtel on most counts. It leads in both wireless and fixed broadband markets, boasts more than 500 million subscribers and is ahead of Bharti in new opportunities such as the under-penetrated home broadband. But in average revenue per user, or ARPU — a key metric monitored by sector analysts and investors — Ambani’s venture has lagged Bharti for seven straight years, according to data compiled by Bloomberg.

For the quarter ended June, Bharti reported an ARPU of 264 rupees, compared with Jio’s 216 rupees — an outcome of its long-standing strategy to prune low-value customers in favor of more inelastic, high-paying users.

Profits show a similar trend as Bharti leads the industry with a 57.4% margin on earnings before interest, tax, depreciation and amortization, compared with 53.3% for Jio.

As a result, Jio is valued at 33.2 times trailing earnings versus Bharti’s nearly 37 times. Nomura and Motilal Oswal Financial Services Ltd. valued Jio Platforms at a premium to Bharti based on enterprise value-to-Ebitda.

That’s a long way since Ambani unleashed Jio on India’s once hyper-competitive telecom market in 2016.

In the tycoon’s signature style, the upstart came to disrupt and eventually dominate a fragmented industry. Its inaugural plan of free call and data services kicked off one of the most intense price wars in any sector the country had seen, causing rivals to exit, merge or consider bankruptcy.

The strategy triggered courtroom battles and accusations of predatory pricing by rivals, with Bharti Airtel — then the market leader — warning it would “kill the rest of the industry and create a monopoly.”For Mukesh Ambani, this was his second attempt at getting mobile phones right and follow his father’s advice to make phone calls as cheap as postcards. Progress on his first venture halted abruptly in 2005, when younger brother Anil ended up with the communication portfolio after an acrimonious succession battle.

The balance shifted in 2010, when the brothers scrapped their non-compete clause. Mukesh launched Jio and Anil’s Reliance Communications Ltd. couldn’t keep up, and eventually went under.

Within three years of Jio’s launch, it was at the top of the market. By the summer of 2019, Jio had the biggest user base, the biggest share of revenues and was primed to invest more to win the transition to 5G. In that time, the venture had added over $70 billion in market value to Reliance’s shares, Bloomberg-compiled data show. Coincidentally, that summer also marked the point of turnaround for Bharti Airtel.

Over the next few years, Bharti shifted its strategy to focus on customers that made it more money and jettison those that didn’t — while Jio still chased new users.

The Ambanis prefer to emphasize Jio’s potential. Mukesh’s oldest son Akash, who is leading the IPO, remains optimistic about his company’s growth prospects.

A listed Jio Platforms plans to pre-pay a substantial chunk of its debt with the money raised from the IPO. That will leave the firm with a stronger balance sheet to compete with Elon Musk’s Starlink on satellite communications. Indian regulators are yet to clear both firms’ applications.

“We always have the ability to take prices up, but what we want to do is to really deliver more services to our customers so that they’re very happy,” Akash said, while addressing a press conference last week.

For shareholders, though, the immediate trigger will be the much-awaited hike in mobile tariffs that should provide a kicker to earnings.

Many analysts share the company’s optimism. With strong network leadership, large-scale infrastructure, and a deepening digital ecosystem, Jio is well positioned to sustain industry-leading growth over the medium- to long-term, according to Centrum Broking Ltd.

The company is attractively valued relative to its peers, with a subscriber base, strong customer service, and a compelling competitive position against Bharti Airtel and Vodafone Idea Ltd, said Chakri Lokapriya, managing partner, RSB LLP.

“Beyond its core telecom business, Jio is well positioned to capitalize on emerging growth opportunities in satellite communications, digital services, AI and other technology-led businesses, providing multiple potential drivers of long-term value creation,” Lokapriya said.