Karthik
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September 1, 2016. It's a date that Sunil Mittal, Chairman of the $14.45-billion Bharti Airtel, would not forget in a hurry. The launch of Reliance Jio, on that day, has changed the face of the telecom business in the country. Jio's free voice calls for lifetime are expected to affect incumbent telecom operators, especially Airtel. After all, they derive around 70 per cent of their revenues from voice.
The largest telco in India, Airtel has decided to take competition head on. Gopal Vittal, MD & CEO of Bharti Airtel (India and South Asia), says that the company has seen tremendous competition in the past 15-20 years. "It requires the right quality of network and right alliances within the ecosystem. There's surely a pricing pressure due to competition. We will deal with it once they start charging," says Vittal. Jio has offered free data and voice calls till December 31. Already, Airtel is feeling the heat of competition. In its recently declared July-September quarter results, consolidated net profit fell by almost 5 per cent. Revenue growth, at 3.4 per cent, also slowed down.
Airtel had starting preparing for the battle with Jio long ago. In November 2015, it had launched Project Leap, a plan aimed at improving network quality, earmarking Rs 60,000 crore investment over a three-year period. It also rolled out myPlan Infinity, which offers unlimited local, STD and national roaming voice calls and data benefits.
Besides, the telco is now focusing on high-value subscribers. Nearly 20 per cent of its subscribers generate 60 per cent revenues. These subscribers are postpaid customers who emphasise more on quality of service than the tariffs. The tariff war typically plays out in the low end of the market - acquisition of more prepaid customers by lowering rates. Vittal points out that Airtel has simplified the tariff structure for postpaid customers. "From about 6,000 plans earlier, we now have just two plans," he says.
The focus has shifted to safeguarding ARPU (average revenue per user). Airtel's ARPU in quarter ending September stood at Rs 188, which is higher than the industry average of Rs 127 (quarter ending March 2016). With Jio's aggressive tariffs, ARPUs are expected to drop for the industry. Besides Airtel, other telcos will be affected as well, given that they will have to drop rates to match Jio's tariffs. To keep ARPUs intact, Airtel has to offer more data. For instance, suppose Airtel is offering 1 gigabyte (GB) data for Rs 250. It will have to offer substantially more data - say 5 GB - at the same price because consumers are demanding more. This way, the ARPU remains same but the amount of data offered shoots up significantly. The network capacity has to be ramped up to deliver more.
In order to expand its network, Airtel has acquired spectrum organically and inorganically in recent years. For example, it has bought Videocon Telecom's spectrum in six circles in the 1800 megahertz (MHz) band and Aircel's 2300 MHz spectrum in seven circles. Besides, it has spent Rs 43,373 crore to acquire 285.4 MHz spectrum in different bands in the last two auctions. "We have made investments of Rs 1.6 lakh crore in building networks so far," says Vittal.
Ready for battle
The largest telco in India, Airtel has decided to take competition head on. Gopal Vittal, MD & CEO of Bharti Airtel (India and South Asia), says that the company has seen tremendous competition in the past 15-20 years. "It requires the right quality of network and right alliances within the ecosystem. There's surely a pricing pressure due to competition. We will deal with it once they start charging," says Vittal. Jio has offered free data and voice calls till December 31. Already, Airtel is feeling the heat of competition. In its recently declared July-September quarter results, consolidated net profit fell by almost 5 per cent. Revenue growth, at 3.4 per cent, also slowed down.
Airtel had starting preparing for the battle with Jio long ago. In November 2015, it had launched Project Leap, a plan aimed at improving network quality, earmarking Rs 60,000 crore investment over a three-year period. It also rolled out myPlan Infinity, which offers unlimited local, STD and national roaming voice calls and data benefits.
Besides, the telco is now focusing on high-value subscribers. Nearly 20 per cent of its subscribers generate 60 per cent revenues. These subscribers are postpaid customers who emphasise more on quality of service than the tariffs. The tariff war typically plays out in the low end of the market - acquisition of more prepaid customers by lowering rates. Vittal points out that Airtel has simplified the tariff structure for postpaid customers. "From about 6,000 plans earlier, we now have just two plans," he says.
The focus has shifted to safeguarding ARPU (average revenue per user). Airtel's ARPU in quarter ending September stood at Rs 188, which is higher than the industry average of Rs 127 (quarter ending March 2016). With Jio's aggressive tariffs, ARPUs are expected to drop for the industry. Besides Airtel, other telcos will be affected as well, given that they will have to drop rates to match Jio's tariffs. To keep ARPUs intact, Airtel has to offer more data. For instance, suppose Airtel is offering 1 gigabyte (GB) data for Rs 250. It will have to offer substantially more data - say 5 GB - at the same price because consumers are demanding more. This way, the ARPU remains same but the amount of data offered shoots up significantly. The network capacity has to be ramped up to deliver more.
In order to expand its network, Airtel has acquired spectrum organically and inorganically in recent years. For example, it has bought Videocon Telecom's spectrum in six circles in the 1800 megahertz (MHz) band and Aircel's 2300 MHz spectrum in seven circles. Besides, it has spent Rs 43,373 crore to acquire 285.4 MHz spectrum in different bands in the last two auctions. "We have made investments of Rs 1.6 lakh crore in building networks so far," says Vittal.
Ready for battle
