Airtel is stretching frontiers of competition with a three-pronged attack

The country's second largest mobile services operator is launching a three-pronged attack in the battle to provide cost-effective, high-speed internet connectivity

For Bharti Airtel, the country’s second-largest mobile service provider by market share, the battle with its chief rival Jio, the wholly-owned subsidiary of Reliance Industries Ltd (RIL), has shifted to newer frontiers. The first is protecting and expanding its lucrative enterprise business, where Jio is making aggressive entry steps, with global tie-ups over the past two weeks. The second is a global investment in broadband satellite through UK-based OneWeb. The third is building proprietary 5G open radio access network (O-RAN) technology to compete with Jio’s plans to sell its next-gen technology to operators around the world.

The first step in ring-fencing its enterprise business is an alliance this month with Amazon Web Services (AWS), India’s largest player in the cloud computing market with a 50 per cent share, to offer products and solutions to large and small medium enterprises. Bharti has also roped in Verizon to introduce its Blue Jeans video conferencing solutions to take on Jio Meet. And PE fund Carlyle has acquired 25 per cent in its data centre company Nxtra for $235 million to help it ramp up capacity.

There is a method in this activity. Bharti is India’s market leader in cloud and data centre services, one of the fastest growing segments in the mobile connectivity market. Bharti and Tata Teleservices control nearly 60 per cent of the enterprise market, according to a report by BofA Global Research.

Bharti Airtel alone has over one million enterprises. The cloud business is expected to explode to over $7.2 billion in revenues by 2022 from $3.4 billion in 2019 and grow at a compounded annual rate of 30 per cent, according to industry lobby Nasscom. The outsourced data centre business is expected to follow suit, growing at around 25 per cent in the next six to seven years. For Bharti, the B2B business accounts for 20 per cent of revenues and 16 per cent of the EBITDA with decent margins.

For the time being, the two rivals are unlikely to encroach on each other’s turf. Bharti has traditionally been strong with large corporations and Jio is making its debut with small and medium enterprises (SMEs), tying up with Microsoft to push its Azure cloud solutions and rock-bottom bundled pricing.

But the Bharti-AWS tie-up will focus on building and co-creating simplified products to enable enterprises to shift to the cloud. And while the initial target will be medium enterprises, analysts say it’s a matter of time before Bharti-AWS will target small and medium enterprises too. This, even as sources say Jio is moving quickly to grab a share among large corporations.

The other area on which Bharti is betting big is satellite broadband for high-speed internet access. That is apart from its investments in fibre-to-home broadband (2.4 million customers) and direct-to-home (16.8 million customers), which also provide internet services. So far, Jio has bet big on fibre-to-home, targeting 20 million homes.

As part of that strategy Bharti recently spent $500 million for a stake in OneWeb, which is building low earth orbit satellites across the world. This is a slightly risky investment. OneWeb recently filed for bankruptcy when Softbank pulled out after the company spent $3.4 billion to launch 74 satellites (the plan is for 648 low earth orbit satellites). The project has already come under a cloud after the UK government said it would invest a similar amount as Bharti, a decision many British politicians have criticised for committing taxpayer money in such a high-risk venture. Just recently OneWeb roped in another partner, Hughes, which is investing just $50 million.

But Bharti promoter Sunil Mittal appears to see an opportunity in India’s recent liberalisation of space technology for private participation to build satellites and launch rockets. “There is no reason these satellites cannot be manufactured in our country at a much lower cost than what is being now done in the US and UK,” says a senior executive of a broadband company. In a webinar, Mittal said that he expects to launch satellite services in India as early as 2022 and hopes to get permission from the Indian Space Research Organisation to set up ground stations.

In its own telecom business, Bharti has over 423 million customers in India, Africa, Bangladesh and Sri Lanka. It sees a large potential market in these countries to tap customers who have no internet and live in remote locations where laying fibre or terrestrial radio connectivity is challenging. Mittal gives the examples of Andaman and Nicobar Islands, the deserts of Rajasthan and forests in Madhya Pradesh.

OneWeb executives point out that over half the world’s population has access to the internet, so there is a large untapped market. Also, with the increase in the Internet of Things, or IoT-connected devices, and growing usage of public cloud by enterprises, there will be a demand for speed. So there is an enterprise market that Bharti can tap.

The downside is that there are too many players jostling for the same space, running the risk of hyper-competition and high mortality. For instance, Elon Musk’s Space X, which has launched 422 low earth orbit satellites already, is looking at putting in 15,000 satellites offering the same high speed-internet to customers. Then there is Amazon with its plans to launch over 3,000 of them. And it is unlikely that RIL will ignore this cost-effective method of offering high-speed internet for long.

O-RAN technology too, with a possibility of creating a global market, is the third prong of Bharti’s “new frontiers” strategy. O-RAN operates through open source platforms to offer operators an array of choice to buy both hardware and software separately and break the stranglehold of incumbent telecom gear companies such as Ericsson, Huawei, Zte, Nokia and Samsung.

Says Thierry Maupile, executive vice president and chief strategy officer in US-based Altiostar, with which Airtel has partnered: “Our collaboration is not only for India but for all countries where Airtel operates and we are even co designing software.” With 50 global operators waiting in the wings to see if the new technology works commercially (Japan’s Rakuten is launching 5G commercial services next month), it could well become a profitable new business avenue. But competition on the new frontiers is pretty stiff too.