“The fact is that only 20 percent of our customers contribute to 80 percent of the business,” Airtel India and South Asia MD and CEO Gopal Vittal said on Tuesday on the company’s earnings call. “So there is a massive opportunity to go wide in order to grow our share to tap into the 80 percent. There’s also a big opportunity to go deep with the 20 percent to gain a higher share of volume,” he added. While Airtel’s earnings have been less spectacular than expected this quarter, the company has managed to post a net profit for two quarters in a row, a feat that took years after Jio’s disruptive entry in 2016.
The company said 12% of its workforce was impacted by the COVID-19 pandemic’s second wave, a number Vittal said was 5 times higher than it was in the first wave.
- Hunting and farming: Vittal drew a hunting and farming parallel to describe revenues from high- and low-income subscribers; high revenue subscribers come under “hunting,” as they are few in number, and lower-income subscribers come under “farming,” as they are the majority of the user base.
- SME onboarding now in-house: “We’re in-sourcing our entire [Small and Medium Enterprises] sales force, which was earlier outsourced. This will lead to upgradation of our SME channel capabilities, helping us gain share.” Vittal added that the company was also building “omnichannel digital capabilities” in SME, and that in the product lines where this was started, 95% of products ordered were bought through digital channels.
- 50 million high-value homes: “We believe there are 50 million high-value homes in India and we already have relationships with over 30 million of them through at least one of our services postpaid, DTH or broadband. Bringing the full power of Airtel to the home by combining all our services together for the customer is an opportunity waiting to be tapped into,” Vittal said. He added that Airtel was taking a single-channel approach to maximise revenue potential from these households.
- Monetizing digital assets: Airtel recently carved out its digital assets as a part of an organizational restructuring. Asked about monetization of these assets, Vittal said, “I think when you talk about monetization, you’re talking about unlocking value, but the way we’re looking at monetization is to unlock revenues. I think fundamentally each of these businesses now needs to start delivering revenues. And if you look at the digital businesses across B2B and B2C we are now in a position where we’re beginning to deliver sequential growth of anywhere between 15 and 20 percent every quarter. And we are now pleased with the trajectory. There’s still a lot of stuff to be done and it’s still very modest compared to the overall scale of the telecom business for obvious reasons. But this is a business that requires very low capital. The marginal EBITDA of these businesses are very attractive because the real cost is really around people, the engineering talent and product talent that you need, all the data science talent. And that’s where we have made all our investments.”
- Target for home broadband: When asked about a target for home broadband, Mittal said Airtel hopes to have 20–25 million home passes (homes which are ready to be connected through broadband), between Airtel’s own installation and through partnerships with local cable operators (LCOs). It’s worth mentioning that Airtel added a record number of home broadband connections this quarter, but that number is just a fraction of what Airtel hopes to accomplish — 274,000 lakh new home broadband subscribers were added this quarter.
- Why are price wars happening? An analyst asked why ARPU growth was so slow, and whether it had anything to do with subscribers’ affordability or industry dynamics. “We have seen countries where we have had price wars in markets with three players like in Indonesia, with 2 players like in the Philippines; in Indonesia in some parts of the country, there are five or six players, but in many other parts, basically, just one or two players. It is about the relative ambitions and the relative aspirations of each player. So that is an industry dynamic here. Having said that, I think the good news is that we are down to a three-player market, which in a large market like India is great.” Vittal added that a price correction to get ARPU significantly increased would definitely happen, as “this is the only way in which you can get a decent return on capital employed”.