India's second-largest service provider, Bharti Airtel, has significantly consolidated its position in 2020 as it puts up an intense fight against Jio for market leadership.

The company has been able to increase its market share from 27.7% in September 2019 to 28.12% in August 2020, despite a tariff hike in a highly competitive market.

The increase in market share, along with a significant increase in the number of 4G subscribers and rising average revenue per user (ARPU) is the result of a well thought out strategy on the part of the service provider.

Figure 1: Digging in: Bharti Airtel has had a good pandemic – but it's still locked in battle with rival Jio.
(Source: Steve Jurvetson on Flickr CC2.0)

"We believe our strategy of being relentlessly focused on winning quality customers is paying off," said Airtel CEO Gopal Vittal on the recent earnings call.

Possibly the biggest reason for Airtel to feel pleased with itself this year is the growth of ARPU without any major impact on the number of subscribers. It improved from INR128 ($1.8) in September 2019 to INR162 ($2.19) in September 2020.

This growth is the result of not just the tariff hike at the end of 2019, but also the focus on 4G and postpaid subscribers.

Signing bonus

The company added 14.4 million 4G and 700,000 postpaid subscribers in the quarter ending September 2020. However, this also includes 2G subscribers being upgraded to 4G. Airtel was also able to bring churn down to 1.7%.

Typically, postpaid subscribers are more loyal, and a higher percentage of this segment will help the company further hike tariffs without any major impact on the bottom line. It launched a special Platinum Plan this year to offer differentiated services to high-ARPU subscribers.

Focus on "quality customers" was possible because of consistent investments in the network. One of the biggest challenges faced by the company is the legacy network.

There was a significant increase in capex. Airtel India's capex in September 2020 quarter was INR41.7 billion ($563 million), up from INR37.9 billion ($511 million) in the September 2019 quarter.

This year, Airtel awarded a contract to IBM and Red Hat to build its telco cloud to enable digital services.

It has also signed a $1 billion deal with Nokia to expand the 4G network in nine circles (service areas). Airtel renewed its managed services deal with Swedish vendor Ericsson earlier in 2020.

The telco shut down its 3G network across the country, refarming the 900MHz spectrum to provide 4G services, to focus on high-paying subscribers.

At work and home

A slew of announcements through the year indicates the company's focus on the enterprise segment.

Following the start of the COVID-19 pandemic, enterprises of all sizes have accelerated their plans to digitize operations. This is one of the key reasons for the renewed focus on enterprise.

Airtel has around 2,500 large clients and over 1 million SME customers. This market is underpenetrated, with the vast majority of SMEs yet to adopt digital transformation.

Early this year, it announced a partnership with Google Cloud to help small and midsized enterprises digitize operations. Bharti Airtel also tied up with Nokia to offer private LTE-based Industry 4.0 solutions to enterprises.

The company partnered with Verizon to bring its Blue Jeans videoconferencing to India, and launched Airtel Cloud by signing a multi-year strategic collaboration agreement with Amazon Web Services (AWS).

Airtel Secure, a suite of cybersecurity services for business, launched. Airtel also plans to launch two new data centers in the state of Maharashtra soon.

Not only are the profit margins better in the enterprise segment, but the "stickiness" of the customers is also better than it is in the retail sector. It is for this reason all private players are focusing on this segment.

On the home broadband front, there has been a surge in the number of users and the consumption of data, especially because of the coronavirus pandemic.

"We are doubling down on broadband through four things; first is the rapid expansion of our own coverage by adding 1 million home passes in the cities we cover in Q2," says Vittal.

"Second, the acceleration of our LCO partnership model. During the quarter we expanded to 29 new cities.

"Third, bringing the full power of Airtel services as well as our partner services to deliver an integrated converged offer encompassing connectivity, entertainment and more. Besides, an adjustment in entry prices for competitive reasons,"

The road ahead

In spite of all the headway made by Airtel, 2021 is not going to be easy.

For one, arch-rival Jio saw a massive investment of more than $20 billion this year from global technology leaders, like Facebook, Qualcomm and Google, among others. It will use its financial heft to consolidate and take a leadership position in 5G. The fact that Jio has all-IP networks helps.

Secondly, Chinese vendors have played a significant role in supporting Indian telcos in offering low tariffs.

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With the "unofficial" ban on the Chinese vendors, Airtel may need to rework its gear-procurement strategy. As the recent controversy regarding BSNL's 4G tender indicates, procuring from Indian vendors may bring some challenges.

Airtel recently organized an open RAN event, which is likely to be a crucial part of its future network. However, the technology is yet to be deployed at a massive scale like India.

Lastly, Airtel needs to innovate. While the operator has proven it is not a pushover, it needs to come up with some truly groundbreaking products or services, much like its outsourcing model in the 2000s, to take a market-leading position.

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— Gagandeep Kaur, contributing editor, special to Light Reading