Bharti Airtel – Banking on Brand + Coverage + Won’t Match Lowest Tariffs

The management of Bharti Airtel hosted Analyst call this afternoon and continued to reaffirm their stand that Tariff cut is uncalled for by them. Mr. Akhil Gupta said,

As seen time and again, STRONGER Player do emerge winner even though they suffer in short term. Lost to new operators will be irreparable. We are Truly Integrated Telco with 35% of EBITDA from non-wireless business. We acknowledge that price is important but as market leader, we do not find any reason to match Lowest Common Denominator. We may suffer temporary setback in Revenue / profit Growth, but in the long run we have a great opportunity.

Mr. Manoj Kohli said,

We are in a period of heightened competition with Multiple SIM environment. We are confident of emerging as a Winner. New operators can gain market share but do not have a viable business model. Airtel’ has tied-up with CISCO for managed services to serve the corporate customers. We are string with Revenue market share of 32.7% last quarter.

Wow, All but self praise, but the Indian Market is so dynamic, arrogance will have its lesson, courtesy Qualcomm, which badly messed up the entire CDMA equation in India. Here are some other important points. My thoughts appear in  [brackets]

  • Mobile Tariff War in India – Multiple Executive Voices of Airtel – For new comers cash burnout is high, rollout becomes difficult and hence natural consolidation. Revenue market share is the only criteria which we are focused on. Pricing is the only advantage for new operators and is not sustainable. [They have Deep Pockets and everyone else have profitable operation base in different country, Globally] Avoids answering a question on Vodafone Essar launching per second billing in Karnataka one of largest circles for Airtel. Airtel constantly looks at the top 3 players in the market and then draws its own strategy. [ So RCom is out of Top 3 now ? ]
  • Why Airtel is Refusing to Cut Mobile Tariffs – Management says if the market leader starts dropping prices, then we are heading towards disaster. The leader charges premium. In Indonesia prices dropped down to 0.0001 Rupiah and we don’t want that to happen here. [ Then do you mean you will slowly give up to competition, have you forgotten Mobile Number Portability is here ? Sure, I agree, new operators may not be MNP ready, but Reliance Communications is 🙂 ]
  • Airtel Brand vs Tata DoCoMo Brand – DoCoMo as a brand has gained lot of traction – Take of Airtel Executives – New player spend lot of money on Advertising and he is doing so in parts of India where he has no coverage either, so he is losing there. Short term heavy spend  by new operators cannot replace the Airtel brand built over a decade [Fair enough] However, they say that Dual SIM customers as high as 25-35% 🙂
  • Airtel Advantage – One Net Calling – Network Coverage – Airtel Advantage serves through its 100K of towers and solid infrastructure 110 mn subscribers.  Scheme has gained remarkable traction [ I felt it was nothing but  a gimmick and an upfront rip-off and hence moved my outgoing traffic to Reliance] Airtel has great indoor coverage in Multiple dwelling units.
  • Spectrum Constraints – Is that what is holding Airtel back from Tariff cuts ?- Airtel doesn’t have any constraint on spectrum and we are focused on our strategy. CAPEX guidance of $2 bn.
  • Employee Downsizing – Earlier this morning  I raised an issue on the drop in Employees in Telemedia division. 4,000 of them are transferred to Alactal Airtel Broadband JV and some could be laid off.
  • Consolidation M & A in Wireless – Regulatory papers and consultations are on. Government must come out with the guidelines sooner. Won’t approach anybody but would like to be approached.

Will competition pull down Airtel’s revenue market share in 6 to 12 months from now ? What say ?