Financial pain has made Airtel a sharper company: Gopal Vittal
The hyper-intensive competition in the telecom sector triggered by Reliance Jio’s entry has made the industry structure more sustainable, says Airtel CEO Gopal Vittal
New Delhi: The hyper-intensive competition in the telecom sector triggered by the entry of Reliance Jio in September 2016 brought financial pain to the industry as a result of a plunge in tariffs and stress on revenue streams. However, it has also made the industry structure more sustainable and has helped Bharti Airtel Ltd become a sharper organisation especially as it branches out into a technology-led digital services company from its earlier avatar of a pure telecom company, Bharti Airtel CEO Gopal Vittal said.
In his earlier stint with Hindustan Unilever, Vittal saw a “laundry battle” with other brands such as Ghadi and P&G and also when ITC Ltd entered the FMCG segment. “Competition forces you to get better in order to serve customers better. That’s the best outcome. The flip side to all the financial pain is it is making us (Airtel) a sharper company,” Vittal says. Edited excerpts from an interview:
What’s the end game?
Not so long ago, there were eight players in the market. If you look at where we are, we are three private operators and one government operator. With 1.3 billion customers to serve, and three operators serving them, I think it is an ideal structure, it is sustainable. If you look at relative positions of different players, Vodafone-Idea combined have 39% revenue market share. Airtel has 33%. Reliance Jio is a shade over 20%.
In my view, in the not-so-distant future, you are going to have three equal sized players. The question is from here onwards, what happens and there the answer is very clear. The current levels of tariff and ARPU are low and have to lift. Only then you will have the financial muscle to continue investments and build networks. The 4G game will be over in the next 12-18 months. But then 5G will come in. That will require another investment cycle. The good news is that what we wished for but did not happen, has now happened, which is a three-player market.
Is it fair to say that Airtel is not just a telecom company anymore?
I think we are certainly a telecom company but in addition to being a telecom company, we are asking ourselves the question what more can we do riding on the infrastructure that we have built. There are some logical things you can do on top of the telecom game—financial services, data centres, enterprise, home-broadband. And then finally things that are a little bit out there where the business model is less proven—content—where we are making bets but these are not big bets that are busting the company. We are building a platform so that we have the customer base. The challenge in content is that if you want to actually produce your own content, it needs a different DNA. The question is do we have the DNA. Maybe the answer to that is no.
So, how do you do it? Currently we are exploring partnerships to do it. At some stage if you have to do it yourself, you have to think about it differently and create a different entity that can actually do it. That to me is still speculative and is out there. At this point, we are focussed on building the platform.
Has this kind of transformation happened in the history of Airtel before?
If you look at our history there certainly have been defining events in the history of our company. Back in 2001-02, we bought licences in C circles as they were called. It was a bold bet to take and it led to a phenomenal outcome. In 2008-09 when pricing crashed with Tata Docomo coming in, it took us some time and we came out of it stronger.
Our view of the world is we are not an R&D company but we keep our eyes and ears looped into what’s happening around the world. We have never fallen behind in terms of taking the bets on technology. We are running a big sprint. We may not be able to see around 6 bends but we can certainly around see 2 bends. That’s the nature of this industry. It changes quite fast. About 2-3 years ago vendors came and gave us projections on how fast 4G will grow and all those estimates has been proven wrong... it has been faster.
In doing so, how do you ensure that the core business doesn’t get affected?
We have studied 25 telcos around the world. You need to have a bifocal lens.
The core business must not at all be distracted. 80-90% of the organisation focuses on the core business. Our strength is our circles. People who are doing this are outside the core. This model works for us. If it’s slightly longer term horizon, keep it out of the core and have somebody else drive it end to end.
Would you have made this change had Jio not happened?
I’ve seen this in three occasions in my life. I have seen in two times in HUL and once here. When you are in a very competitive market and are confronted with high competitive intensity and a new player is coming in...it makes you stronger as a company. It creates a platform for you to do things which you should have done anyway. In all of this, while there has been financial pain in the industry, the customer has been far ahead. Data consumption has grown. Who thought linear TV would be consumed on a smartphone, that is happening. Competition forces you to get better in order to serve customers better. That’s the best outcome. The flip side to all the financial pain is it is making us a sharper company.