Airtel, which had reported flattish 3.13% sequential growth of data users in the June quarter (Q1 FY17), is looking to increase customer awareness for using the Internet. For quarter ended June 2016, Airtel’s data revenue was up 5.5%. Talking to analysts, the company’s senior management talked about data growth and the roll out of 4G.
1. Slowdown in data growth due to device price: Airtel managing director Gopal Vittal admitted that the company has witnessed a slowdown in mobile Internet penetration. “If you look at the total mobile broadband customer base in Q1 that is about 36-odd million customers and clearly something that we are concerned about, I think there are couple of barriers here, one is the price of the device because even today when you look at the shipments of smart phones our estimates are that in Q1 we will probably have about 25 million smartphones shipped out into India but equally there will be 30 million feature phones shipped out into India,” he explained.
“So there are sort of two or three segments within the overall countries with a particular large set of customers for whom a price of Rs 3,000 is unaffordably high and so the device is the barrier,” Vittal added.
2. Trying out data sachet packs: Vittal added that the company is introducing sachet data packs where customers would be charged Rs 6 or Rs 9 per hour for data. He said that this was done as customer education on Internet data is still low. “People do not understand what a megabyte is, so we have launched time bound packs so you know for one hour a certain amount of value let say Rs.9 per hour or Rs.6 per hour and so on and so forth, so these are café packs which people understand,” Vittal said.
“The second part is that educating customers on the need for the Internet and how to use the Internet is an important aspect of our internet literacy and data growth strategy.”
3. Not deploying VoLTE yet: Vittal added that they would not be looking at deploying voice over LTE (VoLTE). “We do not feel the desperate need to do it right now because we have legacy networks which delivers voice well but we will at the right point in time, we will look at testing it and so on and so forth,” he said.
He added that VoLTE works well in sub-GHz spectrum and that would be crucial for its wide scale adoption. “I think what will determine that is the ubiquity of 4G coverage as also sub-GHz spectrum that is good for running VoLTE networks, our experience from around the world suggests that when you do not have sub-GHz band then typically VoLTE does not work as well so we will have to look at that a little more carefully.”
4. Data realization not a concern: Airtel’s management said that it isn’t concerned much about data realizations and it was more focused with growing their data revenue. Data realization refers to money a company makes per MB.
“We are not particularly fussed if realization drops because as long as revenue grows the question really is do you have the capacity to support the volumes that comes as a result. As realization is a function of two things, one is the extent of data that is used from the allowance that is given to the customer, which has gradually been seeing a significant upswing. And the second is the mix of customers in the portfolio so when you have customers who are heavier consumers of data let us say 2GB or 3GB or 5GB, you tend to see a lot lower realization and for the right reasons as long as it is ARPU (average revenue per user) accretive.”
5. Not getting into devices: “On handsets we have no intentions of getting into our own handsets but we do bundle very aggressively so we believe it’s the internet – the ecosystem is an open one and so we are in conversation with everybody Samsung, Micromax, Intex and Apple and so on and we do bundle with everyone.”
6. Bangladesh growth slowed due to biometric KYC: Airtel mentioned that Bangladesh growth was hit due KYC norms in the country which need biometric authentication. “South Asia numbers is largely coming because of very strict KYC norms biometric registration in Bangladesh so that has pushed down the numbers but minutes on year-on-year continue to be high there,” Airtel CFO Nilajan Roy explained.