How Airtel Fought Back Against RJio
Bharti Airtel, India's largest service provider (for now), is the country's only operator to have put up a spirited fight against Reliance Jio, the disruptive new entrant that first arrived in India late last year.
While Vodafone and Idea, India's second- and third-biggest operators, decided to merge, number six player Reliance Communications and various smaller telcos -- including Videocon, Telenor and Tata Teleservices Ltd. -- have been forced to sell their businesses or wind up their operations.
Bharti Airtel Ltd. (Mumbai: BHARTIARTL) not only matched RJio's offers but also steadily continued to expand its 4G coverage and spectrum footprint across the country. In the last fiscal year, it installed 72,663 basestations, and it is on track to deploy as many in the current one. It installed 35,272 basestations in the first half, ending in September.
The operator had a 36.5% share of market revenues at the end of September, and that figure rises to 41.5% when including the share controlled by Tata, which Airtel recently acquired. A tie-up between Vodafone India and Idea Cellular Ltd. will claim about 43% of revenues.
Airtel has indicated that it plans to spend about $2.5 billion in capital expenditure this year on stronger fiber and 4G networks. This is in spite of a huge drop in its revenues and profits following the entry of RJio. Airtel has also said it will invest $310 million in digitizing its business to improve the customer experience across a range of services and channels. (See Airtel to Spend $2.5B in Capex as RJio Threat Grows .)
In addition, the company hopes an alliance with South Korea's SK Telecom (Nasdaq: SKM) will support its 5G plans as it eyes a key role in India's future 5G market. Finnish equipment vendor Nokia Corp. (NYSE: NOK) is another 5G partner. In a sign of its growing technological prowess, Airtel has rolled out voice-over-LTE technology in India, and demonstrated more advanced MIMO (multiple input multiple output) systems. (See India's Airtel Calls on SKT for Tech Help.)
Airtel has also come up with a response to the JioPhone, the low-cost 4G device that Reliance Jio launched earlier this year. Through an alliance with Karbonn and other Indian device makers, the market leader has been able to produce its own low-cost 4G handsets.
Airtel could also be seen to have benefited from the exponential surge in data consumption that followed RJio's launch in September 2016. While industry reports suggest that Airtel initially lost data customers, when RJio was still marketing free data services, it has managed to add more than 8 million subscribers since April, when RJio began charging for its services.
Airtel has clearly benefited from acquiring a slew of telcos since the start of the current fiscal year, including Tikona, Telenor and the consumer wireless business of Tata Teleservices. It is now in talks to acquire a swathe of spectrum from beleaguered Reliance Communications.
Because most of these telcos were struggling desperately, Airtel was able to conclude favorable deals in all cases. Its takeover of Tata Teleservices, for instance, is being done on a debt-free, cash-free basis. Airtel also bought all of Tata Teleservices' spectrum holdings, 40% of which can be used to support any kind of mobile service (although it will assume a small portion of the outstanding spectrum liability owed to the government). (See Airtel Eyes RCom's Spectrum Reports and India's Airtel to Take Over Tata Teleservices .)
The challenge for Airtel will be to successfully integrate these firms in the coming year. But in that regard it has a strong track record, having previously absorbed companies including Augere, Videocon and Aircel Dishnet.
Another concern for Airtel is on the innovation front. Generally speaking, it has tended to react to moves made by RJio rather than take the lead. When it comes to technology innovation, RJio has an advantage in that it remains relatively unburdened by legacy technology and systems and can more easily embrace radical new approaches.
To succeed in this area, and become regarded as more of a "thought leader," Airtel may have to overhaul its business models and internal culture. Forthcoming 5G and Internet of Things technologies could present the company with an opportunity to take a leadership position, instead of simply replicating what RJio has done.
Gagandeep Kaur, contributing editor, special to Light Reading