New Delhi: India’s biggest mobile phone service firm by customers, Bharti Airtel Ltd, has for long talked about synergies with other consumer businesses run by its controlling shareholder, the New Delhi-based Bharti Group, owned and run by the Mittal family. The family has joint ventures in retail and insurance besides the wireless, broadband, direct to home, or DTH satellite TV, and Internet protocol TV (IPTV) offerings from Bharti Airtel.
Brand building: Kohli says Airtel’s strategy of using only one brand will help it reduce customer churn rate. Ramesh Pathania / Mint
In an interview, Manoj Kohli, chief executive and joint managing director of Bharti Airtel, lays out how his firm and other Bharti companies are increasingly cross-selling services and products, and how he expects both sides to benefit from such sales to the same consumer. Kohli, who says he travels to villages that Bharti Airtel is moving into with its coverage every other week, feels so-called third generation, or 3G, phones will help millions of Indian consumers leapfrog over the use of computers for high-speed Internet access. Most Indian mobile phone networks today run on second generation, or 2G, or its variants.
First off, let’s look at competition from your closest rival, RCom (short for Reliance Communications Ltd). What do you think of its new, low GSM tariffs?
I don’t want to react to any tariff plan. I will just say that free tariffs have never led to customer satisfaction or company viability. Some customers who are deal-seeking customers may be happy for a temporary period but as soon as you pull back and start charging, they also pull back traffic.
And also company viability. We are running our respective companies for a healthy business. So, I think that is not achieved through free tariffs. More importantly, I think if you offer free sales or free volumes to new customers, then your incumbent customers feel a bit cheated that why should I not get the benefit.
In the last year, Airtel and Bharti as a group has got into IPTV, DTH and retail, and increased focus on broadband and insurance. Are there any synergies you’re looking at between these businesses, maybe even cross selling?
Our strategy is one of wallet share. Get the maximum wallet share—if the customer, let’s say, has Rs100 in the wallet for telecom, media, Internet services...then the challenge for us is how can we get the maximum out of the wallet. Luckily, we have an Airtel product portfolio which has mobile services, fixed services broadband DSL (or direct subscriber line) services—wireless broadband will come in when 3G comes in— and then satellite services, IPTV services, etc. So, first we are making a One Airtel product portfolio. For example, we recently launched this Rs999 package. In that in Delhi you get three things—fixed line, broadband and IPTV; that is, you get voice, data and video. This is triple play package and it has become popular in Delhi.
Outside Delhi, because we don’t have IPTV, we are providing DTH. If the same customer wants mobile, then we have a quadruple play bundle or quad play where we are giving four products.
It’s called One Airtel—same brand offers many services.
We are also planning that we should do similar bundling with retail and insurance, which are two big businesses with Bharti. This becomes One Bharti, where, if customers buy something from Easyday (Bharti Retail’s convenience stores)—let’s says worth Rs3,000—then they should get some benefit of telecom...they should get some DTH or something—either a new connection or some free airtime, etc.
Similarly, (with) Axa insurance, because you have to remember the customer is the same. Same customer buys from Easyday and same customer has insurance also. This is the first time in the globe where we will actually leverage the power of three sectors.
When do we see this?
It’s started happening. Walk into any Airtel showroom and you will get all the products.
Axa is in some showrooms— not all because we are doing pilots.
Does this increase customer stickiness?
It does. You will see our churn rate will actually come down in the future because there is global research which says that if there are three VAS (value-added services) used by the customer, then the churn rate will come down to its lowest. The three VAS could be in entertainment, mobile commerce or (customer) is getting some benefit out of insurance product or a media product like satellite TV. So, if there is Airtel engagement with the customer on three products or services then chances are that he will stay with us.
That is our strategy on brand—that we have one brand. We systematically have withdrawn four or five brands: we have withdrawn Magic, we have withdrawn Touchtel, we have withdrawn OneIndia.... When we launched IPTV, some people suggested we should have a new brand but we said no, there is a power behind Airtel and we will use that power.
And we (do) woodpecking: you see a mobile ad and a satellite TV ad. Then, tomorrow you see a broadband ad—it is all the same brand. And the propensity towards that one brand for most of the products is higher.
As an operator how do you see 3G changing the scenario?
We believe that it has two or three benefits. One that voice efficiency will go up—3G voice efficiency is better than 2G voice efficiency. Which means within the same spectrum we will get better efficiency.
Second is data speeds. Data speeds will be better and the same content that people use —downloads that you do, browse the Net—the customer will get a better experience.
Third is data cards on laptops.
How do you expect 3G to affect revenues, profits, churn...?
Anything which is good for the customer is good for the sector. And good for Bharti. That’s the theory we are running with.
We believe that it will definitely give better customer experience, better revenue, more usage of both voice and data.
Will it change the trend of falling average revenue per user?
All customers may not go to 3G as 3G handsets are comparatively more expensive than 2G handsets.
So, people in the upper end of the market will definitely move towards 3G, especially in the top 10 or 15 towns in the first phase. In the second phase, maybe the medium towns, etc., and, finally, maybe there will a time a few years from now when all handsets will be 3G like today all handsets are GPRS or Edge. (GPRS is short for general packet radio service and Edge stands for enhanced data rates for GSM evolution, both technologies that enable better data speeds than on 2G mobile phone networks.)
Are you looking at any rural benefits from 3G?
Luckily, passive infrastructure is in place so 3G roll-out will definitely be faster than 2G roll-out. Wireless broadband will bring a lot of benefits to the customers in small towns and villages. The biggest revolution, which I believe India will have, (is) instead of laptops, people will use handsets. So, for India the laptop (will be) the handset.
For example, many customers haven’t seen a fixed line in small towns. They went straight to the mobile. There will be a technology leap from no phone to GSM phone. No fixed line. Then there is a technology leap from no Internet to wireless broadband without going through the desktop or laptop. I think India is already seeing big leaps and in the next few years 3G will help us take the big leap.
All the DTH companies are running losses, when do you expect to break even with your DTH operation?
I cannot give financial details, but I can say that we will have more viability than other companies because of the synergy factor at Bharti.
I think we are the most cost-effective service of all and, hence, our viability is much much ahead of all the other products.
One, we have not created a stand-alone company like many others: stand-alone organization, stand-alone brand, stand-alone distribution—everything is stand-alone. What we have is everything is common. The brand is common, functions like HR and finance are common, distribution is common—everything is common except for the product.
So, our cost structure is much, much lower than (at) all the other competitors.