As Bharti Airtel, India’s largest telecom operator, completes two decades of mobile services, it’s set to face competition from Reliance Jio by the end of the year.
As Bharti Airtel, India’s largest telecom operator, completes two decades of mobile services, it’s set to face competition from Reliance Jio by the end of the year. While data accounted for 18% of Airtel’s revenues in the last quarter of FY15, it has had to face the fury of the online brigade and OTT players over its zero rating plan. Gopal Vittal, MD & CEO (India & South Asia), Bharti Airtel, spoke to Anup Jayaram and Rishi Raj on a gamut of issues facing Airtel and the industry. Excerpts:
As you complete two decades, competition could get tougher with the entry of Reliance Jio. How does it change the dynamics for Bharti?
We’ve been around for two decades. We’ve grown in a very competitive market and have an obsessive focus on keeping our customers happy. That’s all what matters. Some operators operate at half the price. Our pricing is at a premium over the market, but we have to be very competitive at the same time. We’ll do whatever is right to ensure that we remain competitive and profitable. When a new operator comes, there is change. Let’s see what happens.
Your voice realisations are falling while data is rising. How do you plan to balance it out?
There is a finite limit to what people will pay for telecom services. As the economy improves and incomes rise, the mix of consumers and devices changes. The share of wallet on telecom services could increase over a period of time. If you expect significant ups and downs to ARPU on telecom, that is not going to happen over a 2-3 year period. The effort will be on increasing penetration of data services. We need to get more and more people to use mobile internet, which will actually drive revenue growth.
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Where do data tariffs go from here?
Tariffs have been progressively going down. Part of the reason is that people are using what you are giving them. Earlier, if you gave them 1 GB at Rs 250, they were using 500 MB on an average; so you were getting not 25 paise/MB but 50 paise/MB. But if they use full 1 GB, your realisation falls to 25 paise. That drop is okay because it is still growing your usage, still growing your revenues. The danger is when realisations lead to revenue erosion. We’ve not seen that today. The second is when consumption increases in markets like Delhi, Bangalore, Patna and Jaipur where you have congestion on the network. Over the last 20 years, we have invested R1.5 lakh crore—in the last five years R1.1 lakh crore and in the last two years Rs 50,000 crore. To experience congestion because we do not get sites to host mobile towers hurts.
As operators removed freebies, realisations have improved. Is that phase over? What are you doing to stay the leader?
Over the last 3-4 years, voice revenues have progressively gone down, while data revenues have increased. Voice is slowing because as penetration is increasing less and less new customers are coming onto the network. As an industry, the volume of voice minutes has gone down by 6%. Today the realisation that you get in voice is 32-33 paise after accounting for termination rates. The standard rack rate is almost 90 paise. If you take outgoing only, the 33 goes up to 55-60.
The game changed a couple of years ago. We have a five-pronged approach to tackle this. The first is winning with operational excellence. We want better quality customers. There is an app which can tell a salesman the churn that a retailer is delivering for us at the end of three months. That has led to our churn being lower than the industry, at 2.7%, which is half that of the next operator. Smaller players are at 8-9%. The second is winning with valuable consumers. We are putting emphasis on postpaid and enterprise customers while improving the experience at the retail store. We have rolled out 400 of our own stores. We spend time on training; we spend 21 days before a person goes to a store on training.
Third, we are simplifying business processes to make it easier for the customer. We have 17 moments of truth. When you shift from prepaid to postpaid, it is a moment of truth; if you pay a bill and don’t get acknowledgement, it is a moment of truth; you shift an address and it doesn’t work properly, it’s a moment of truth. Earlier, a change of a postpaid plan would take us 14 days, today we do that online. We created something called the Decision Tree. When you call at the call centre, it is empowered to answer the problem. Some of the capabilities that we have developed have moved the needle. We need to look at distribution improvement, deeper into rural and manage the volume versus rate tradeoff.
How do you explain call drops to consumers?
It’s a challenge. I wrote to our postpaid customers to explain what the issue was and asked them to help us get sites. It’s very tough to get sites in Jaipur, for example. The congestion is not just in Delhi. Patna is more congested in terms of throughput per site than Delhi. That is because people use data. It is a notion that people in Patna consume less. They use a lot of data. The amount of traffic per MHz of spectrum in our cities is 13 times what’s in Shanghai. That’s one problem. The second is how can you provide coverage. You can do it by more spectrum or more sites. For a given amount of spectrum, if you have more sites, you have more capacity. It’s as simple as that. Today, our 2,500 sites in India are shut down. In Lutyens’ Delhi, we need 217 sites, but we have 110. Sites have been shut down due to whims and fancies—some RWA complains that these sites must be taken off. India is always going to have a shortage of spectrum. Seoul has eight times the number of sites that Delhi has and operators there have ten times the spectrum that an Indian operator. Korean networks are the best in the world.
Is there a short-term solution to call drops?
You can have sites on government property. The minister has agreed to help us. Telecom being declared an essential infrastructure, you cannot shut down sites. We need a transparent and simple framework to acquire sites. We need a framework to put fibre on the ground to connect sites.
How do you see spectrum trading and sharing guidelines helping Bharti?
The caps have to be looked at. The returned spectrum and the sharing caps need to accommodate the optimal and most efficient use of spectrum. That should be the national priority. Our view is if you have spectrum, you should be able to share it with anyone. I don’t understand why we have a cap over a cap. You have a cap of 25% on total holding. If you share spectrum with a second operator, who also comes under the 25% cap, then if it can’t cross 25%, then who can share. As long as it is bought fairly in an auction, the sharing cap should be a summation of the two.
Have 4G services begun to take off?
It’s still early days. There are devices in the Rs 6,000-7,000 range. But the number of needed devices are not there. We have our music app. We will also be looking at a video app very soon.
What is the challenge with OTT and e-commerce? What kind of alliances are you looking at?
The beauty is that whatever innovation is happening around us, we are bringing it to the people on their devices. We are agnostic to who succeeds or who fails in the OTT space. We love all OTT players. We see our monetising ability through the terms of a megabyte. If it is used on YouTube or Snapdeal or Wynk, it really does not matter. As e-commerce grows, we grow, since our data grows.
But the critics of your Zero rating plan said the same that operators earn through data usage so why complain that OTTs are eating into your revenues. Have you revised your stand on Net Neutrality and the Zero rating plan? Do you still want regulation of OTTs?
We don’t want any regulation on OTTs. We want regulation on voice, because there is an arbitrage there. Let everyone be subject to the same rules. We don’t believe OTTs must be regulated. On the contrary, innovation must be encouraged in that system. At the end of the day, if India needs to be connected digitally, you need investments in networks. You need Rs 5 lakh crore of investments over the next 10 years. Somebody has to find that money based on a business model that makes economic sense, for which there must be the same rules. You relieve us of all the rules. That’s also fine.
Our stand on Net Neutrality is the same from day one — that we are fully committed to it and it’s same for the Zero platform, that there’s no violation in it of the principle as it is basically a toll free service to customers. Some 140 small e-commerce players have signed up with us for the platform but we have not activated it so far. We will wait for the Trai’s recommendations and the final decision of the government before moving ahead.
Do you have enough spectrum? Would you need 700 MHz band?
Let’s see what the roadmap is. Additional spectrum must be in tune with equipment and device ecosystem. Today, the ecosystem is more evolved, which is why the use of spectrum is high. The problem we have is network experience. Spectrum has to be in the current ecosystem—1800/2100/2300 MHz band. So, 700 MHz is some time away. The 700 frequency is a very good spectrum, but is different from the US spectrum. It is used only in Australia and Korea. The number of devices are very few and very expensive.
Considering that there has been some consolidation in the industry, do you still need M&A norms?
I think for us as an industry efficient utilisation of spectrum means guidelines around both sharing and trading, with caps that make sense. That’s something the government is working on and hopefully it should be coming through very soon.
What should the new Trai chairman do?
We are looking forward to working with him. We hope he comes out with spectrum sharing and trading norms.