In 2015, Bharti Airtel, India’s largest telecom operator, became the world’s third largest operator in terms of subscriber base. With the largest spectrum holding, the company is well placed to deal with the expected competition in the coming year, especially in the 4G space. In an interview with tele.net, Akhil Gupta, vice-chairman, Bharti Enterprises, talked about the telecom sector’s performance over the past year, the key challenges the sector faces, the company’s strategy going forward, and his outlook for the sector. Excerpts…
What trends do you foresee in the telecom sector in 2016?
In my opinion, 2016 will be a year of massive roll-outs of data networks. In the past five years, the industry as a whole has invested around $30 billion on spectrum. Today, 30-33 per cent of all operator sites are 3G enabled. While 3G services will be expanded throughout the country in 2016, the roll-out of 4G services would also be accelerated. However, 4G is currently a niche product and will be initially confined to the big cities. The industry, in my view, will definitely grow at a double digit growth rate in 2016.
What is your view on the ongoing consolidation in the industry?
The consolidation in the industry actually started in 2012 with the Supreme Court judgment leading to the cancellation of 122 2G licences. At present, we are witnessing some specific moves by certain operators. Reliance Communications, Aircel and MTS India are likely to merge into a single entity. More significantly, today the three major players account for 85-86 per cent of incremental revenue market share while their total market share is 72-73 per cent. In the long run, there could be only four to five big players in the telecom market.
How has the role of telecom companies evolved over the years? What further changes do you expect in the near future?
Telecom companies will, and should, fundamentally remain network companies. They may carry different kinds of traffic at different points of time, but that is an evolution. We first started with voice services, then came SMS services and today we have various types of internet-related applications such as messenger services and video streaming services. In collaboration with application providers, telecom operators should focus on devising a network wherein some of these services and applications are transmitted to customers in the most efficient manner. I don’t think telecom service providers should venture into sectors such as health care. They should instead focus on providing content to customers in a seamless manner.
As far as payments systems are concerned, telecom operators have already been handling them for a very long time. With the introduction of payments banks, the speed of undertaking these operations will increase.
What is your opinion on the consolidation in the telecom infrastructure segment?
In the case of Bharti Airtel and Indus Towers, there is co-existence but there is no conflict of interest. While Bharti Infratel has towers in seven circles, Indus Towers operates in 16 circles. Although there are four circles in which both the companies have mobile towers, a mutual cooperation has been reached in these regions. Hence, Bharti Infratel and Indus Towers are not competing with each other.
As far as the rest of the industry is concerned, there has been a major consolidation with the coming together of the American Tower Corporation and Viom Networks. Over time, the smaller players too could join the fold of other players or they could combine together. Overall, the competition in telecom infrastructure is adequate but healthy.
What are your views on the right-of-way (RoW) challenges being faced by the industry?
The Department of Telecommunications has come out with industry-friendly model guidelines on the issues related to RoW. However, many of these issues fall under the ambit of the state governments. While some states have started following these guidelines, others have lagged behind. Now the latter too have started appreciating the basic rationale behind these rules and slowly, we hope most of the states will adopt them.
What role can the Telecom Regulatory Authority of India (TRAI) play in supporting the telecom industry?
As a regulator, TRAI has to strike a balance between the interests of the telecom industry and consumers. The regulator has shown tremendous support to the industry on the RoW issue. As far as the issue of call drops is concerned, the operators also recognise that improving the quality of service will benefit not just consumers but also the industry. However, there are some technical limitations with regard to the call drops which need to be appreciated.
“The fear that RJIL will cut prices drastically and even offer services for free is unfounded. Airtel will welcome them, like we have welcomed all new competition. But we believe we already have in place all the services that RJIL plans to offer.”
What are some of the unresolved issues that are affecting the industry today?
The treatment of over-the-top (OTT) players is a big unresolved regulatory issue. OTT players deliver the same services as those provided by telecom operators, but the latter are subjected to licence fees and several other restrictions. We, as operators, are demanding that the same service must have the same rules.
What are the new technological developments that will be of enormous consequence for the Indian telecom sector?
The telecom industry has been witnessing a constant evolution in terms of technology from 2G on the 900 MHz band, to 1800 MHz and GPRS and EDGE, and finally to 3G and long term evolution technology. Each new technology is aimed at enhancing capacity on the same unit of spectrum because spectrum is a finite resource. By providing additional capacity, successive technologies have helped operators deliver better speed to individual customers. This is the fundamental purpose of technological evolution in telecom.
In addition to data, what are the other big untapped segments that could drive the sector’s growth?
Data is a comprehensive term that subsumes the new features, new services and new capabilities being introduced in the market. One has to understand that data is nothing but connecting individuals to the internet. The same goes for the government’s Digital India programme. The programme does not rest on e-commerce, payments banks, etc., but on the fact that a billion people can be connected to the internet. Telecom companies like ours are committed to delivering this to the country.
The telecom industry does not have the luxury of giving more than two to three years to achieve the goal of connecting a billion people to the internet. There is a certain section of the industry that believes that the goal of delivering broadband to the masses can be achieved through wireline. However, I am of the view that the most efficient way of doing this is through wireless technology and, within wireless, 3G will be the most effective medium.
In my view, it is only a matter of a year when every handset that hits the market will have 3G built in.
How well do you think the industry is serving the rural market right now?
The industry has done well when it comes to the rural market. The telecom industry has been able to deliver the reach that was unimaginable earlier, covering over 90 per cent of the country’s population and 85 per cent of the geographical area. These are massive achievements for a 20-year-old industry. This has been possible because of the huge investments the industry has made in offering connectivity at an affordable price.
What is your view on the company’s Africa operations?
Admittedly, we are a little behind what we had set out to achieve in Africa. There are many challenges in the African market. Most of the countries in that continent are emerging markets and do not have big industries or a services sector. They are still dependent on the commodites, which are not doing very well. Despite these issues and challenges, we continue to believe in Africa.
Going forward, our strategy will be to become the number one or strong number two operator in each country we operate in. If that is not the case, we do not mind exiting the market. Currently, we are trying to fix our existing operations in Africa before looking at other regions of the world or within Africa.
When you compare Bharti Airtel with other big global operators, which are the areas in which you feel the company could do better?
There is no area today where we do not stand at par with the best operators in the world, be it our data network, 3G, or 4G. At the same time, the areas of relative strength and weaknesses vary from country to country. On an overall basis, I believe that in any respect, we have all that the other big operators across the world have today.
What is your expectation with regard to Reliance Jio Infocomm Limited’s (RJIL) impending service launch?
It is my view that every time there is a difficult situation in the market, the big players get an opportunity to shore up. Fundamentally, our focus is on remaining financially strong and constantly striving to serve our customers better. I believe that this strategy will help us tide over any phase of disruption.
As far as RJIL in its current form is concerned, nobody doubts its abilities and intentions. It belongs to one of the most respected industrial houses in the country, which has proved it to be capable of creating value whichever industry it ventures into. RJIL, like any other operator, is aiming to earn revenue by offering good services to customers.
The fear that RJIL will cut prices drastically and even offer services for free is unfounded. Airtel will welcome them, like we have welcomed all new competition. But we continue to believe that we already have in place all the services that RJIL plans to offer.