Bharti Airtel is the only operator that was able to withstand the onslaught of Reliance Jio in the Indian market. While the number two and three players — Vodafone and Idea Cellular — decided to merge operations, both Reliance Communications and Tata Teleservices had to shut shop.
What makes Airtel resilient to competition? It is a combination of Airtel’s geographical and operational diversification besides network advantages that are helping the company offset the decline in revenues from the mobile business.
In FY17, only 55 per cent of the company’s revenues came from the Indian mobile business while over 21 per cent was contributed by the African mobile operations. The rest came from its tower infrastructure, digital TV and other services.
“Considering the current phase of India’s telecom sector, diversification is not just a choice but a need. The ecosystem of the sector needs players to invest in content as well as technology in the data-driven mobile world,” says Hetal Gandhi, Director, Crisil Research.
Life-long advantages Moreover, being the first pan-India player has given Airtel almost life-long advantages. “It has consumers who are early adopters of technology and high-end ARPU (average revenue per user) generators. It has good-quality subscribers — a first-mover advantage,” says Kolla. Airtel also has more spectrum in the higher quality 900 MHz band. In contrast, Vodafone and Idea had to settle for the 1800 MHz band, which is less efficient and requires more capex. “In terms of network resources, Airtel, unlike Vodafone or Idea, has its own robust backhaul connectivity criss-crossing the country. This enables it to offer better quality services,” Kolla adds. In terms of quantity of spectrum, Airtel has a wider footprint with 72 MHZ per circle compared with RJio’s 50 MHZ.
Market leader perks Being the market leader has bestowed added advantages on Airtel. Crisil Research has compared financials of the top three players for many evolved telecom markets.
“We understand that the market leader is able to charge a pricing premium. Further with better utilisation of assets, it is able to make higher returns. All this results in a relatively better credit profile for market leaders and enables them to sustain price wars and competition much better than their peers,” says Gandhi.
An added advantage is its ability to invest in future technologies, improve service quality and take on lower pricing is much better. “It aids in surviving cut-throat competition,” Gandhi adds.
In a recent report, Goldman Sachs has said Bharti Airtel remains in an enviable position to grab market share and increase its profits should the market continue consolidating at the tail end.
“Such consolidation could help Bharti offset a significant chunk of its market-share loss to RJio; we believe Bharti would very well end up maintaining its number one position as a result,” it said.
So, while price wars and consolidation may be the order of the day, the pecking order in telecom is unlikely to change for a while, at least the top slot.