Bharti Airtel to leverage deal with Reliance Jio Infocomm

Written by Jayati Ghose | New Delhi | Updated: Dec 17 2013, 20:40pm hrs
Bharti AirtelThe Bharti Airtel official contended that any telecom company that tries to offer only data services may find it difficult to build a long-term sustainable business in India. (AP)
Bharti Airtel, which is focusing on increasing data traffic to drive revenue growth, is likely to leverage its infrastructure sharing deal with Mukesh Ambani promoted-Reliance Jio Infocomm to gain a stronger fibre network. A strong fibre network is the backbone for efficient data services.

A top executive from Bharti, on the condition of anonymity, said the company is also in talks with the government for creation of a transparent Right of Way policy to facilitate creation of infrastructure in the form of towers and laying of fibre. Until now, Bharti has refrained from making large investments required for digging and laying optic fibre.

Jio, on the other hand, has been aggressive in laying fibre networks. Jio, which holds pan-India 4G spectrum, plans to launch high-speed internet surfing and data download services from March neat year. While market sources said Jio is in talks with device manufacturers to develop affordable dongles, tablets and smartphones in the 4G space, there is no official confirmation on price-offerings.

The Bharti official, however, contended that any telecom company that tries to offer only data services may find it difficult to build a long-term sustainable business in India.

Jio with its deep pockets may disrupt the market, but Airtel is well positioned with the requisite amount of infrastructure and assets in place needed to tackle competition, added the executive.

Analysts said the back-end collaboration between Bharti and Jio could also lead to some strategic agreement on tariffs, devices and spectrum auctions. Historically, Indian telcos that have collaborated in the back end, have also had interests aligned in the front end (Bharti, Vodafone and Idea, for example). If the agreement between Bharti and Jio is taken to a logical conclusion as implied by the company statement, it could mean a more benign competitive environment across tariffs, vendor negotiations and even spectrum auctions, a Credit Suisse report said.

In India, with the smartphone device ecosystem still in the development stage, revenue maximisation only through data services could pose an issue, said analysts. Data shows that for a company like AT&T, which sells only data plans, tariffs are as high as $50 for one gigabyte (GB), whereas in India data tariffs are around $3-3.5 per GB.

3G device penetration in India is currently only 10-11% despite the fact that device costs have fallen to around R3,500. In LTE (4G), smartphone costs are upwards of R20,000, moreover devices are restricted to dongles, the Bharti executive said.

He was also quick to point out that voice services will continue to be a strong offering in India. Around 80% of the Indian market will continue to be feature phones in the next couple of years, which would use a lot of voice-based services. Moreover, companies are able to price data rates low because it sits on the legacy of established voice networks, the Airtel executive added.

He, however, said that limited spectrum availability, and lack of fibre connectivity are big challenges that could limit data usage explosion. According to a recent Alcatel-Lucent Bell Labs forecast, data traffic on metro networks will increase 560% by 2017 mainly driven by demand for video.