Strategy: Bharti Airtel opts to work with all players via the partnership model

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October 26, 2020 6:30 AM

Analysts have also pointed out that both Bharti and Jio are unlikely to hike tariffs anytime soon as the status quo suits them.

The dilemma Bharti faces is that either the device maker or consumers would need to be offered a subsidy and once the subsidy is withdrawn the product economics of the venture might suffer.The dilemma Bharti faces is that either the device maker or consumers would need to be offered a subsidy and once the subsidy is withdrawn the product economics of the venture might suffer.

Telecom giant Bharti Airtel will further its initiatives via the partnership model and has ruled out working with an ownership model, a senior executive told FE. Rather than create content and seek strategic investments from over-the-top and technology majors, Bharti will work with all players in the digital space on a commission basis.

The telco believes that while its model may be different from that of Reliance Jio which has focussed on ownership and received equity investments from global technology majors like Facebook and Google, there is room for both telcos to grow given the Indian market now has only three telecom players.
Of these, two are strong players while the third — Vodafone Idea — does not offer much of a challenge. “The market is ideal for all the three to compete and thrive,” the executive said.

However, there is one aspect which Bharti is still examining closely and on which it is yet to take a final call — developing a low-cost smartphone in partnership with a device maker. Developing such a smartphone would ensure that its 2G customers upgrade to 4G and remain with it and do not migrate to Jio.
Jio has said that it would develop a low-cost Android smartphone in partnership with Google.

The dilemma Bharti faces is that either the device maker or consumers would need to be offered a subsidy and once the subsidy is withdrawn the product economics of the venture might suffer.

Offering a subsidy in perpetuity is not feasible. “So we are closely examining whether or not to get into manufacturing such devices and are still to take a call on it,” the executive said.

Bharti believes premiumisation of tariffs has kicked in with the last round of hikes in December 2019 and that any increase at this point of time may impact competitiveness. “Taking a lead in hiking tariffs at this point of time does not make sense for us but if any other player does so we would definitely follow suit,” the executive said. The company, however feels that its average revenue per user needs to increase from the present Rs 157 to around Rs 200-300 over a period of time.

Analysts have also pointed out that both Bharti and Jio are unlikely to hike tariffs anytime soon as the status quo suits them. A hike by them at this point of time would end up helping Vodafone Idea revive itself. A delay in hiking tariffs hurts Vodafone Idea, not Bharti and Jio as neither of them has a cash flow mismatch.

To take on competition from a resurgent Jio, following investments by Facebook and Google, Bharti plans to unveil a digital store and an advertising platform. It hopes to leverage its 160-million strong digitally active consumer base to strike alliances with content providers like Netflix, Amazon Prime as well as banking and insurance players. The company is understood to have developed two platforms – digital store and ad-tech – both of which are in the beta testing phase.

The digital store would be a B-to-C platform accessible to consumers through its app as well as web applications and would list all the company’s offerings. The store would also list the services of over the top players like Netflix, Prime, Zee5, etc and insurance and banking players. Bharti’s consumers would be free to access subscriptions of OTT players through this store as well as buy insurance and banking products. Any subscription which would accrue to OTTs and other service industry players from its platform would earn the company a commission.

The ad-tech platform would be a B-to-B initiative where consumer-centric companies can list their products. “By listing on our ad-tech platform companies can expect higher conversion of enquiries into sales for their products as we have 160-million digital consumers who are heavy users of music and video content,” the executive said.

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