Bharti Airtel, the Indian telco with the largest subscriber base of 75 million, has set up a fund with a corpus of $44 Million (Rs. 200 crores) to fund innovation and entrepreneurship in the telecom sector. Some details from the FAQs:
– There’s a cap of $4.4 Million (Rs. 20 Crores) on each deal.
– The fund is open to Early Stage ventures that are registered in India
– They’re primarily targeting ventures with a commercial business model, not non-profit
– Sectors that they’re looking at – M-commerce, value added services, IP-based technology, lifestyle and location-based services
You may use this form to apply. The release is fairly low on details.
A Change In Mindset?
This move is quite ironic, and also indicative of a change in mindset. So far, operators have been squeezing startups with poor revenue shares and download “leakages”, while VC have been funding them, taking a punt that the situation will improve. Startups kept raising money, VCs kept taking a punt, operators kept benifiting from this vicious cycle. Because of this situation, VCs became more circumspect about the direct-to-consumer mobile VAS business.
Future Factory
Three years ago, Airtel launched “Future Factory”, intended to test the waters for new innovative services, with Centres of innovation in Kolkata, Delhi, Mumbai and Bangalore. While the initial mandate for Future Factory was to experiment with applications related to Mobile Entertainment, Commerce and rural applications, we’re learned that they’re now also looking at social applications, with the agenda of engaging the user base. No formal updates on Future Factory, though. Other operators like Reliance communications, and Tata Teleservices have developer programmes. OnMobile Global formally announced their developer program at VAS Asia in August.
Read The Fine Print
As much as this move is being lauded as “pathbreaking”, we’d sure like to take a look at the fine print. We’ve contacted Airtel corporate communications for more details on the fund, but they rarely respond, so we thought we’d highlight some possible issues that we’re looking for details/comments on:
– Lock-In Period: I wonder if there will be a particular time period, for which the service providers will have to offer services exclusively to Airtel. Airtel will thus be able to differentiate their mobile offerings from others in the business.
– Operator Conflict: Unless a product is compelling, or has garnered a large enough user base on Airtels network, I wonder if competitors like Vodafone and RCom will be open to getting on board, a company in which Airtel has equity stake. Startups in particular should be careful about this, because it means that your deployment will be limited to Airtel.
– Revenue Share Differentiation: It won’t really serve Airtel to stymy the growth of companies that they have a stake in, so will these companies get a differentiated revenue share, and more transparency in case of downloads?
– Private Treaty: The other element which is not very clear, is whether there’s real money on offer, or is Airtel merely picking up stake in exchange for some concessions. Could this be a private treaty-like business?
If there are other issues that you think might affect companies that go in for this deal, do leave a comment.
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6 Comments until now.
“download leakages”???
It is called fraud everywhere else. Only a fool thinks that Operators will pay heed till they are sued for fraud in court along with their CEO’s for being party to this.
If you look at Bharti Telesoft as an example of a company in which Bharti has a majority stake, the comments about other operators not being interested in innovation are perhaps not completely valid. This may have to do with the fact that VAS rarely drives acquisition – which by all accounts continues to be the focus of operator businesses (for the foreseeable future too I might add).
Agree with Lord Haw Haw too. A recent and extremely alarming trend amongst operators is a desire to pay only what they collect. ?? how on earth is David ever going to be able to dispute what was collected, or ensure that Goliath bills?
Vodafone continues to remain the knight in shining armour and the complete Gentleman on this count. Power to them.
I wish there were a way to talk about operators without taking individual’s names but you just cant.
Each operator is as straight as a pigs tail.
The only way this business of content will grow is if cos/services bypass the operators, create a whole new revenue stream and most importantly, new operators come about who grow rapidly.
We have to make sure that there are 10 operators with 10% market share each and not the existing set up.
I hope the government announces a couple of more operators, caps on marketshare in each circle and based on certain spectrum allocated only a specific number of subs/MHz of spectrum.
Thats the only way to deal with the issue operators.
….and then there is reality!
happyman: haven’t both BTSL and Cellebrum had to push to shake off that operator owned VAS co tag? Great point on the fact that VAS doesn’t drive customer acquisitions. Could you elaborate on the “pay only what they collect” trend?
Mobstir: That direct to consumer strategy has been tried before, but at what cost? 10 operators with 10 percent marketshare will probably come back down to 5-6. The new Telcos will struggle to survive
Guess ur right Nikhil.
What we need are strong anti-trust laws. Also and investigation on how many emails and phonecalls/sms are exchaged between these organisations at various levels.
Someone needs to drag them to court and get their phone/email records to see how many people at say an airtel speak/communicate to people at vodafone and then let them explain why?
In the US competitors cannot be seen meeting or talking…we need a law like that …we have one but it needs more BITE.
Bharti is winding down BTSL. It is now tying up with another provider and is demanding increased rev share (80%)
Sigh. I wonder when will VAS co’s learn…