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Interview with Bharti Enterprises’ Akhil Gupta

Wednesday, 13 February 2019

Interview with Bharti Enterprises’ Akh...

Bharti Enterprises’ vice-chairman and Bharti Infratel’s chairman, Akhil Gupta believes that the sector has reached the right industry structure with three private telecom operators, besides MTNL/BSNL. Operators will now have to focus on faster 4G roll-outs. He also talked about the need for deeper fibre penetration to meet the growing data demand while underscoring the criticality of cybersecurity. Edited excerpts...

What were the top achievements and disappointments for the sector in 2018?

Rationalisation in terms of industry structure has been the biggest achievement for the Indian telecom sector in recent times. A three player market is the ideal composition, and we have finally achieved that. Of course, there are disadvantages in terms of the price war that followed Jio’s entry. As for disappointments, I do not believe that regulations have panned out as planned for the industry. The price points are too low, almost unsustainable. That said, I believe that with the correct industry structure, this too shall be addressed over time.

What are your views on the recently released NDCP 2018?

It is a good policy, particularly from the infrastructure point of view. However, it is not going to correct the pricing issues of the market.

How did 2018 pan out for Bharti Airtel?

There was struggle obviously, on the mobile side. But mobile in India accounts for only one-third of our total EBITDA (earnings before interest, taxes, depreciation and amortisation). Another one-third comes from Africa and one-third comes from other businesses. Africa has done very well, so have other businesses too. In comparison, the Indian mobile business has been under some stress.

There is a growing trend of convergence between telecom, media and technology. Over-the-top (OTT) players have come into the picture in a big way. What are your views in this regard?

In my personal opinion, we need not have media along with telecom. What a telecom company essentially needs to do is provide networks and a robust middleware whereby all OTTs and applications can plug in and our customers can seamlessly access such content. There is no need for a telecom operator to become a media company. Already, there is so much content available that you merely need to facilitate it for the customer. One can enter into strategic alliances as content and networks are interdependent, but I do not see it as necessary to invest in content companies.

How have industry dynamics changed with the merger of Vodafone and Idea?

From a tower company point of view, there have been a lot of exits. But that has now settled. Other than that, it is good that with the merger, there are just three big telecom operators left.

Is the tower infrastructure still expanding? What is the current level of 4G roll-out?

It will continue to expand as so much of 4G is yet to happen. Industry is rolling out 4G very quickly. By the end of 2019, it should be more or less matching the 2G footprint. And once that is done, 5G will be here.

Are we on track to launch 5G in line with global timelines?

We are definitely on the right path. It is evolving faster than was expected. But will it be here next quarter? No. It will take a couple of years. I would say, more like the second half of 2020, or maybe even later.

Will Bharti be the first to launch 5G in India?

It will be launched simultaneously by all players in India.

Do you think there is enough investment capability in the sector right now to take on the network expansion burden?

It is a very individualistic situation. At Airtel, we have adequate resources. That said, additional investment is needed.

What is Bharti’s capex guidance for this year?

For the current year, it is around Rs 240 billion-Rs 250 billion. For next year, we are working it out, it may be slightly lower than this, but we are yet to finalise it.

What are the big regulatory gaps that still need to be worked on?

I believe all the regulatory issues, especially the big ones, stand settled. Now whether those are to one’s liking or not, that is a different issue. That said, the policy and regulatory authorities should look at spectrum pricing. 5G will not take off if the spectrum is too expensive. The other area I feel regulators need to look carefully at is predatory pricing to ensure healthy development of the industry.

How do you see tariffs moving in future?

I very firmly believe that if the structure of the industry is right, the tariffs and profitability will eventually fall into place. It is just a matter of time. ARPUs may take another three to four quarters to start recovering.

What opportunities do you see in the infrastructure space, especially in light of programmes like Digital India and Smart Cities? What role do you foresee for fibre networks?

For 4G and more so for 5G, fibre will play a very important role. Here, tower companies can play a big role in connecting towers to the transport networks and to the buildings. Providing Wi-Fi within buildings and outdoors is another area that infrastructure companies can focus on. Small cell deployment will gain traction once 5G comes in. Smart cities would need all these solutions. Right now, the experiment has been a little slow. We are working with Bhopal and Vadodara under the Smart Cities Mission, but I expect many more cities to open up in future.

What has been the progress on the right-of-way (RoW) front?

I believe the Department of Telecommunications (DoT) has done a great job on that front. Based on the Telecom Regulatory Authority of India’s recommendations, they have come out with model guidelines, which are now being followed by most states. Several states have come out with their own policies based on the model guidelines, which has been really helpful. The NDCP 2018 also makes it very clear that RoW needs to be provided. The charges have gone down in many cases but, most importantly, they have become rational and uniform.

There has been a big push on “going green” in the tower industry. What has been the progress so far?

It has been a big success. In simple terms, going green means using less diesel. Diesel consumption is, in fact, going down quite rapidly, both in absolute as well as per operator term. This has been made possible in part by the use of high capacity and lithium-ion batteries and in part by the improvement in grid supply. The use of diesel gensets is coming down quite rapidly. Currently, we have about 20 per cent sites where we don’t use diesel gensets at all. They are totally diesel free. Our target is to eliminate diesel consumption in all those sites that get 14-15 hours of electricity per day or more.

The government is extremely bullish on Wi-Fi deployments. Bharat Sanchar Nigam Limited (BSNL) also has plans in this regard. What are you doing on this front?

As an infrastructure company, we intend to cover virtually every big building through Wi-Fi but not provide these services ourselves. We will offer this infrastructure to all operators on a non-discriminatory basis. While globally, operators typically install their own Wi-Fi networks, in India, I believe sharing will be the norm.

Do you think Wi-Fi may become a separate industry of its own?

It would continue being a part of telecom as most of the data is generated and consumed indoors. This data will be produced on Wi-Fi and then transmitted on fibre.

What is your view about the relevance of a data protection framework in India?

Let me put it in a slightly broader frame. I think cybersecurity is in every which way obviously the most important topic today. Needless to say, if the whole piece is not stitched up, this ticking bomb may explode anytime. India too cannot escape this. I am not too conversant with where we are in that journey, but cybersecurity is a big thing for all companies, including Bharti. We have to cybersecure our networks and then provide it to our consumers. If our networks are secure, half the job is done. Of course, OTTs would have to manage security at their end too. Currently, I think every telco is spending a lot of resources on security, both on network and data (its own as well as that of customers).

What are the key opportunities for vendors in the telecom sector?

I believe that the scope for expansion of networks in India is massive. The next two to three years will see massive 4G roll-outs and capacities being built. By the time that will be done, 5G would be introduced. Here, naturally, the biggest gainers will be the equipment makers. I feel they would maximize their gains if the evolution of technologies can be more by way of software upgrades rather than hardware additions/replacement.

What are going to be the biggest telecom trends of 2019?

Technology would naturally move quickly towards 5G. By the end of 2019-20, 5G will start becoming a reality; it will be launched in select developed countries and will thereafter proliferate into emerging countries. I also see 2019-20 being a big year for device evolution. On the 4G side, I expect many more smartphones to be launched at affordable price points and this will not only push our Indian business, but also benefit our African business. As for technology, I believe 4G capacities will start getting enhanced by using massive MIMOs.

Is the worst over for the sector?

I would definitely think so. We have achieved the right industry structure and the sector is slowly finding its way out of controversies. These are signs that things are improving.

 
 

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