Sunil Mittal’s game plan for Bharti Airtel to tackle competition from Reliance Jio freebies

By: | Updated: November 2, 2017 12:35 PM

While Bharti Airtel does appear badly bruised in its tough fight with new entrant Reliance Jio, which has upset the telecom order in India, it certainly is not out yet. Chairman Sunil Bharti Mittal's spells out his strategy to weather the storm.

Amid the ongoing turmoil from Reliance Jio?s competitive offerings, Bharti Airtel earlier this week showed some signs of stability returning with improvement in some key metrics.

Telecom sector is under stress, and not just financial strain of being buried under a huge pile of debt, but also the operational stress as the hyper competition from Reliance Jio’s dirt cheap tariff offers and novel plans seems nowhere close to coming to an end any time soon. Incumbent operators, even the strong-footed ones, are reeling, and most have been forced to either sell out to the rivals, or wind up altogether.

Amid the ongoing turmoil, Bharti Airtel, India’s largest telecommunication service provider — for now — earlier this week showed some signs of stability returning, with improvement in some of the key operating metrics and less than expected fall in the net profit. While the company does appear badly bruised in its tough fight with the newest entrant, which has upset the telecom order in India, it certainly is not out yet. (Track live stock prices here: Bharti Airtel)

When the going gets tough…

Bharti Airtel Chairman Sunil Mittal today spelled his ‘strategy’ to keep the company firmly in the game and emerge strong when the fight is eventually over. And that strategy is simple: acquire as much ground as possible, and wait out the storm. “The bet here is that capture more share of growth and then hope that tariffs come to a level that is sustainable,” Sunil Bharti Mittal, a veteran of the Indian mobile telephony industry, told CNBC TV18 today in an interview on the sidelines of an event.

“We have to capture the growth… most of the growth, whether it be bytes or bits, or voice minutes… we have to capture all those as much as possible to show that we maintain a solid market share,” Sunil Mittal said, adding that when the “table starts to rise”, he hopes the company to be at a sustainable position.

… the tough gets going

“It inevitably has to rise because in the end everyone has to have an economic case,” Sunil Mittal said to CNBC TV18, adding, “A strong operator has come in, he wants to gain market share, he is bound to give goodies,” in an obvious reference to Reliance Jio and its attractive tariff schemes that has led many a subscriber to switch to the new operator.

Earlier this week, Bharti Airtel said its fiscal second quarter consolidated adjusted net profit plunged 77% on-year to Rs 343 crore from Rs 1,461 crore in the same quarter a year ago, as competitive pressure from Reliance Jio continued to weigh, leading to a sharp drop in its India revenues. Even so, the results still beat most analyst estimates.

Earlier last month, Bharti Airtel almost pulled a coup by agreeing to merge into itself the Tata group’s struggling consumer mobile telephony business Tata Teleservices in return for assuming the latter’s outstanding spectrum liabilities, understood to be worth around Rs 1,700 crore. The proposed merger between the two is a result of a long and bloody battle that the Indian telecom companies have been fighting for survival after the entry of Reliance Jio into the landscape, which has led the others scrambling to keep their customer base.

Looking up, finally

The other two largest operators Vodafone India and Idea Cellular have already agreed to merge, which will make the combined entity larger than Bharti Airtel. On the other hand, Reliance Communications, the embattled telecom unit operated by Mukesh Ambani’s younger brother Anil Ambani is also reportedly mulling partly shutting down its 2G and 3G services.

Most telecom companies are now looking at 4G and the futuristic 5G services for growth, which rely heavily on monetisation of data offerings rather than voice services, which have become increasingly commoditised. “In the last 2-3 years people have moved from just voice and SMS to a data world. They have moved into being broadband customers,” Sunil Mittal said in today’s interview.

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