India’s leading integrated Teleco Bharti Airtel reported numbers for June-12 quarter indicating pressure on all fronts. You name it and every parameter was looking down ARPU down to Rs 154 from Rs 158, Voice RPM down to Rs 35.7 from Rs 36.7, Data ARPU down to Rs 40 from Rs 44, and this means the bottomline as well, yes it was down 24% QoQ. Amidst, weak show and gloomy government policies on telecom, the management strategize their moves and discussed the same.
Airtel Mobile / Wireless Strategy
As indicated earlier, Airtel is focused on maintaining the lead in Revenue Market Share. However, this quarter they had to undertake some cuts and management blamed it on 2% higher Service Tax and processing Fees on Combo Pack regulations by TRAI. Cancelled licensees were more aggressive and as a result dilution of prices happened. The overall industry churn is high teens at 16-17% and for Airtel it is 8% as well.
As a result of aggression from new operators, Margins are down and will take longer time to recover, acknowledges the management. How the industry behaves will get corrected on the basis of fundamentals and should move towards consolidation, when strength will return. Airtel believes that they are currently facing the Worst and rationality will return soon.
Airtel has Data Analytics running at Cluster, Circle, etc level and is monitoring on Daily, Weekly and Monthly basis to maximize profits and at the same time have expanded subscriber base [ A classical Operations Research problem in my view] without destroying value to other telcos with prudent measures as the market leader. Channels Checks indicate that Bharti continued to push tariff discounts in the month of July, notably in Maharashtra, Kerala, UP (East) circles, followed by Andhra Pradesh over the past week.
Wireless / Mobile CAPEX Returns
Airtel spent a whopping Rs35.7 bn, up 50% QoQ, adding 5100 base terminal stations in India meaning more coverage and was visible in robust traffic growth of ~9bn minute. Airtel clarified that on a case by case basis they activating more Cell Sites to enhance Availability and Quality of Network and they look for results every time when a site is up and running. Also investing in OFC and Backhaul due to increased demand for Data.
Airtel 3G has also been enabled on some of the new sites as they believe data is the future. Airtel has started reporting 3G metrics separately on Customers, Data and ARPU.
Bharti Infratel Listing
The company announced its intentions to list its passive tower subsidiary Bharti Infratel on the bourses by dilution of upto 10% equity, but the timing is unknown. Resolution of key regulatory issues like possibility of 6% license fees on tower-co and demerger of Indus need to happen before a potential IPO. Bharti Infratel valuation is currently pegged at US$4bn.
Airtel Says no to Device Strategy – No SmartPhone Subsidy
Airtel reiterated that the case for handset subsidy will not change despite increased 3G coverage as over 90% of Indian Wireless Runs on Pre-Paid subscribers and it is very difficult to recover costs if the customer abandons and moves to a different network. However, they are running their own subsidies by means of compensating for the device in the monthly bill as in the case of 4G Multi Mode dongles. However, competitor Aircel – Pocket Internet Company has said that it will very soon come with aDevice Strategy to Push Data.
Airtel declined to comment on their participation in the forthcoming Spectrum Auctions or not. I’ll share my thoughts on what could Airtel do in the forthcoming Spectrum Auctions 🙂