Airtel draws up strategy to take on rivals Reliance Jio, Vodafone Idea

Airtel is also concentrating on a niche market for its payments bank business, which has 30 million customers

Bharti Airtel has put together a four-pronged strategy to take on its rivals Reliance Jio and Vodafone Idea.

For one, the telco is targeting winning number one slot in terms of net addition of smart phone 4G subscribers month-on-month, wresting the position from Reliance Jio, through re-farming spectrum and aggressive fiberisation of towers. Currently, according to estimates, Reliance Jio has been adding 4-5 million 4G subscribers each month. 

It is also aiming to gain the highest share of post-paid subscribers by grabbing customers from Vodafone Idea as it goes through the challenges of merger in its network. According to estimates, while the two together had over 55 per cent of all post-paid subscribers, the rest being with Airtel, the gap is reducing. 

Post-paid subscribers are important because they bring nearly 20 per cent of telco revenues. Thirdly, Airtel had decided to take a measured approach in expanding its fibre-to-home broadband (FTTH) business as well as stick to a “partnership” model for content to power over-the-top (OTT) services, rather than take the aggressive stance of Jio in both these fronts.

It is also concentrating on a niche market for its payments bank business, which has 30 million customers and does a throughput of Rs 70 billion per month, focusing on rural and smaller towns, cashing in on its distribution strengths, offering cash services and catering to the needs of migrant labour in cities. 

And fourthly, Airtel has decided to prune its bulging subscriber base at the bottom of the pyramid by increasing the minimum tariff for a recharge to Rs 35 month. It has more than 100 million customers who do a recharge of less than Rs 10 a month. Airtel executives say this would reduce their customer base but would improve its revenues and reduce costs. 

In order to get a larger share of net 4G smartphone subscriber additions, Airtel is re-farming its spectrum in 900 MHz in 10 circles from 2G to 4G spectrum, which will improve indoor data usage and VOLTE voice. In the remaining circles, it will either liberalise the administered spectrum (five circles) or go for auction again (seven circles) when they are announced.

They are not interested in bidding for 5G spectrum. It is also re-farming 2100 Mhz spectrum also to 4G. Airtel has been doubling its fiberised towers over the last two years, which has made it possible for it to offer 1 gbps speeds in all cities and in 100,000 rural locations, and it will be completed by March next year. 

Sources in the company say unlike Jio’s aggressive stance of targeting 50 million homes with FTTH services, Airtel is of the view that the market is much smaller. Airtel insiders say Indian homes spend about 1.5 per cent of their earnings on telecom and broadband services, and therefore potential homes must have a yearly income of Rs 1.5 million to afford such services. 

“The number of households with this income is 30 million and 18 million homes have fixed broadband. So the market is not as big,” says an insider. That is why Airtel will expand its fibre-to-home network to cover 2-3 million homes every year. Of those only a small percentage will convert to Airtel. “We think this pace is more than enough because we have DTH subscribers also. When there is a major disruption in the market, we will take a call,” the source said. 

In the content space too, Airtel sources say the approach will be of “partnerships” rather than taking stakes in content companies and broadcasting players. He points out this model has worked. 

For instance, Netflix has added 300,000 customers through its exclusive tie-up with Airtel while Amazon Prime has added 1 million customers to its fold through the Airtel alliance. 

Airtel executives point out the average revenue per user has now bottomed out and is expected to go up with increase in data usage.
 

What telco plans to do
 

• Wrest the top spot in terms of net 4G customer additions per month from Jio
• Gain largest share of post-paid customers (who contribute about 20% to telcos’ revenue), pushing Vodafone Idea behind
• Reduce subscriber base at the bottom by increasing minimum recharge tariffs
• Grow cautiously in FTTH market
• Use partnership route to develop content for OTT rather than through acquisitions
• Increase non-telecom revenues