Thirty to 40 million of the new customers on Airtel’s network are using mobile phones for the first time, Airtel India MD and CEO Gopal Vittal estimated in the company’s earnings call for Q2 FY 2020–21 on Wednesday. As the company posted better results than anytime in recent memory, here are eight takeaways from Airtel’s strategy going forward from the company’s call with investors:
- Airtel tariffs are already at a premium: Vittal repeated Airtel’s stance that customers are paying too little for the data allowances and calling benefits they’re getting. “If you can get as much data as you need, unlimited calling, and some content [at ₹160], that is extremely low pricing.” He said that ARPU needs to grow eventually to ₹300, and said that current pricing is not sustainable. As soon as other operators hiked prices, Vittal said, Airtel would follow, adding that Airtel’s pricing is already “at a premium”, or slightly costlier.
- Home broadband got a boost from Jio’s pricing pressure: “We have seen a surge in home broadband [129,000 net adds] arising out of work-from-home, growth in streaming, online education, and price reduction in the broadband segment,” Vittal said, adding that the impact of prices reducing in the wired broadband segment would only be visible in the next quarter. Prices reduced in the wired broadband industry due to JioFiber launching 3.3 terabyte FUP, high-speed plans at lower rates. Vittal said that Airtel’s experiments with local cable operators for home broadband in smaller towns was a success, and that the company started to offer broadband in 29 new towns in Q2.
- Postpaid seeing “strong traction”: Vittal said that over 700,000 new postpaid customers — who generally pay more on average than prepaid users — were added in Q2. “This came from two or three things; one is our omnichannel capability; close to 40% of our high value acquisition are omnichannel, where people are ordering online, and it’s getting delivered straight to the home.” Vittal added that acquisition of corporate customers has also led to traction, along with store walk-ins.
- Subsidising phones is a “bane”: Responding to a question on Jio developing a low price 5G phone with Google, Vittal said that Airtel was cautious about subsidising phones. “The good news in India is that device distribution has remained separate from telecom distribution. The added cost of distributing devices through a telco network is very high. By and large, Indian telecom has stayed away from device subsidies.” Vittal said that this was a good thing as telcos in other parts of the world are struggling to even maintain margins while subsidising phones, and are trying to wean themselves off the strategy.
- 5G two years away: “The [5G] ecosystem is still nascent, device prices are still 700 to a 1,000 dollars, and applications are still nascent,” Vittal argued. He then brought up the real concern that prevented the company from displaying eagerness for upgrading: there was no “business case”, he said, at the Telecom Regulatory Authority of India’s reserve prices for 5G spectrum. These are arguments Vittal has advanced before, and little seems to have changed.
- Airtel and Open RAN: “Today, our networks are increasingly future ready,” Vittal said. “We’re one of the leading players in the Open RAN effort” to create open networking standards to support emerging standards like 5G. Jio and Vodafone are also members of the O-RAN alliance. Vittal cited experiments that Airtel had carried out in Q1. Vittal said capex costs would go down if O-RAN succeeds.
- Increase in data traffic helped “sweat” investments: Vittal said that increase in data demand was letting Airtel use its capital expenditure more efficiently. Data networks are generally architected, he said, to support peak loads. But now that growth in demand is higher but more consistent, he said, the capex of the infrastructure is being put to use throughout the day.
- General entertainment not a strong differentiator: While Airtel has carrier billing deals with streaming services, and has bundling prepaid plans with Hotstar, Vittal said that non-exclusive “general entertainment” offerings like this weren’t, so far, appearing to be a strong differentiator. Vittal added that for specialised content like sports, the advantage was more pronounced. He did concede, however, that bundled tariffs with higher costs for Hotstar worked well.
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