New Delhi: India’s largest mobile-phone service provider by subscribers, Bharti Airtel Ltd, has started to respond to tariff cuts by rivals. Akhil Gupta, deputy chief executive officer and managing director of Bharti Enterprises Ltd, speaks about the tariff war and prospects for the industry. Edited excerpts:
We are seeing a brutal tariff war out there. Bharti Airtel did not respond initially, but now it is responding, at least in some circles. What is your take on that?
Everyone knows that tariffs have been under pressure due to the heightened activity by some new entrants in the GSM (global system for mobile) space. We, as the leader and incumbent, have responded in some markets on a selected basis... What is really important is your scale, your reach, your network, your brand and I guess all of them taken together, do count. I am not suggesting that you can afford to be completely competitive, but naturally as a market leader, you do not also need to just match the lowest common denominator and I think we are working on that.
Tough battle: Bharti Enterprises’ Akhil Gupta says that the company is convinced that nothing that is happening on the tariff front is new and it has seen such price wars from time to time. Ramesh Pathania / Mint
In the long term, is the Indian telecom sector going to remain as profitable as it was? There is growth and the industry is adding lots of subscribers, but is the growth profitable?
The true answer to this is that when you talk of industry profitability under these circumstances, it has to be seen in a slightly different light. This sector would have different kinds of profitability for companies of different levels of maturity and scale. If you look at a new entrant, with all my experience in this industry, I definitely find it difficult how a business case can really be made. So they would have a different set of profitability, which means their losses would be lower because they are not able to roll out fast, and for other players, those who have profits, may dip into losses and for some of the bigger players like us, I think we are convinced that nothing what is happening is new, we have seen these skirmishes and battles and wars from time to time. The one thing which always emerges not only in India, in our own experience, but across the world, is that whenever such things happen, the stronger players always emerge stronger. We are convinced about it and I don’t think anything which we see today is disrupting the business model. Sure it could disrupt a little bit...in the mid-term or the short term, but I think on a long-term basis, I am absolutely convinced that it doesn’t disrupt the business model which is based on some very solid fundamentals.
Do you think the per-second billing proposal, which the Trai (Telecom Regulatory Authority of India) has clarified is only going to be set as an option and will not be mandatory, will be a long-term disruptive element for you?
Not at all. If you look at the market, there are different kinds of plans and this per-second option is one of the plans and I think it’s a little unfair to say that the regulator could say something in Geneva. All that he (Trai chairman J.S. Sarma) mentioned was that he is thinking that everyone should have a one per second plan, which can be good. I don’t think he meant that he wanted to interfere in tariff forbearance. So per second is one of the tariff plans and it really doesn’t matter.
Do you think Bharti Airtel will be able to maintain a price premium going forward considering average industry ARPM (average revenue per minute) is between 45 paise and 50 paise and you are perhaps at the higher end of that band?
I think the market leaders and people who have a greater market share and greater brand equity share, will certainly be able to keep some premium.
Have you just revisited your strategy of not focusing on Arpu (average revenue per user), but on revenue market share?
Absolutely not. I have always said Arpus in our line of business, particularly when you talk of mobility, have really no meaning. I absolutely maintain it and the other fundamentals of capital productivity, operating efficiencies, overall revenues and revenue market share. I am at least intact on that so far.
I am not going to ask you about MTN (Group Ltd of South Africa), but what I want to really ask you is how do you plan to get the next 100 million subscribers?
I think it will be wrong to think in terms of our acquisition strategy and in emerging markets and club that with 100 million subscribers. I think subscribers are an outcome of the actions that you take. Let’s talk of Indian growth and let’s talk of, separately, our strategy on the international front. In India, we are at around 440 million mobile customers today. I have absolutely no reason to doubt that this will in the next few years go up to 800-850 million, if not more. Obviously, if I have 100 million in the first 440-odd million, I will have another 100 million in the next 400-450 million.
So what you are saying is that Bharti Airtel will maintain a 25% market share even as the market itself doubles?
I think that it is a challenge we have to take and we are confident that we would be certainly able to maintain that.
What is the outlook in general for the telecom industry?
The scope and potential of this industry remains absolutely intact and the beauty is that it’s sustainable because it is so widespread and so deep into the country. We are committed to take it even deeper.