The CEO of India’s second-biggest telco echoes concerns heard elsewhere about 5G monetization.
The top executive at Bharti Airtel, India’s second-biggest mobile operator, has complained about the poor return on investment his company makes and added his voice to concerns about the business case for 5G.
“Our ROCE [return on capital employed] for India is 9.5%, which is extremely low for a business that is so essential to the digital spine of this country,” said Gopal Vittal, Bharti Airtel’s managing director. “Clearly, tariff repair is needed to set this right.”
āThe architecture of pricing in India is quite broken because people who can afford to pay a lot more are paying a lot less simply because of these unlimited plans, which are like effectively a one-size-fits-all plan,” he continued. “If you look at markets like Indonesia or Thailand or any other markets in Asia, you’ll find small, medium, large, and extra-large, and there’s a pathway to upgradation. This is not something that we can do alone,” he added.
Telcos including Airtel, Reliance Jio, India’s biggest operator, and Vodafone Idea may attempt to raise prices after upcoming general elections, the results of which are to be announced on June 4. While they would help Airtel to grow average revenue per user (ARPU), the quantum and nature of these increases are not clear. Despite the complaints, Airtel has steadily grown its ARPU from 178 Indian rupees (US$2.13) in the March-ending quarter of 2022 (Bharti’s fourth quarter) to INR209 ($2.50) in the same period two years later. ARPU rose INR16 ($0.19) in the last year without price rises.
Airtel now boasts about 72 million 5G customers after a rapid deployment of the new-generation technology. But Vittal also complained about the “limited monetization” of 5G so far.
“The way we see it is the overall return of the business,” he said. “I think the return that the industry really needs is predicated on tariff repair. And this is really the heart of the problem that we have today. The pricing and tariffs are at an absurdly low level relative to any other part of the world. So tariff repair is sorely needed for return ratios to improve.”
Capex slowdown
His comments came as Airtel reported sales of 285.13 billion Indian rupees (US$3.42 billion), for the recent March-ending quarter (Airtel’s fourth), up 12.9% year-over-year. Airtel’s home broadband unit grew by 20%, while its business and wireless divisions recorded growth rates of 14.1% and 12.9%, respectively.
Its strategy has been to focus on migrating heavier-spending 2G customers to 4G or 5G networks. Airtel is also trying to grow its base of postpaid subscribers and served 230 million of them in March, up from 223 million a year earlier. Data consumption over this period has risen from 20.3 gigabytes to 22.6 gigabytes, contributing to ARPU growth.
In comparison, Jio’s ARPU grew from INR178.8 ($2.14) in March 2023 to INR181.7 ($2.18) in March 2024, an increase of just INR2.9 ($0.04).
Indian operators all spent heavily on capital expenditure last year as they deployed 5G. But capex is likely to fall this year. Airtel plans to add 25,000 new sites (compared with 43,000 sites in the last fiscal year), largely in areas where it has poor coverage, having reported capex of INR84.91 billion ($1 billion) in the recent fourth quarter.
“Capital will continue to be allocated to our transport infrastructure,” said Vittal. “That is something that requires investments for multiple years because of the growth of data and the fact that it impacts all our businesses, home broadband, B2B as well as mobility.”
The operator is also looking to continue investments in the home and enterprise segments. Airtel is additionally exploring “bolt-on acquisitions in the B2B area,” said Vittal. “This is an area where some of our capabilities on adjacencies can be strengthened.”
Vittal also said Airtel has now stopped all investment in 4G and is investing in capacity enhancement in 5G.
Having so far used non-standalone 5G technology, which relies on the use of a 4G core, Airtel is now planning to move to a standalone (SA) network.
“We have got a pilot [of 5G SA] going on in one state and we are extending this to another circle [service area] as well,” Vittal said. “There are a lot of trials happening to see how this will work out. The mid-band holdings are really a big and priceless part of the overall SA strategy, which is 1800MHz and 2100MHz band.”
However, Vittal pointed out that 5G Fixed Wireless Access (FWA) will take time to scale, with Airtel planning to deploy this on 5G SA. “We are live in 25 cities and currently streamlining the customer journeys,” he said. “We will be at scale in the coming eight weeks. As stated earlier, this will only complement FTTH, which is fiber to the home with a focus on weak fiber areas.”
Secret sauce
Airtel is also targeting opportunities in the enterprise sector of the market, said Vittal, noting a partnership approach. “We are also looking to form strategic alliances with a few top companies so we can package solutions along with our own,” he said. The company recently announced an alliance with Google to grow its presence in the cloud segment.
In a step toward further automation, Airtel has now developed what it calls a Converged Data Engine, described as a “secret sauce” by Vittal. It is already being rolled out in Africa, and Airtel is also in talks about it with other telcos.
“Telcos can simply use a data model as a starting point to make modifications based on their business context,” Vittal said. “This can be done in weeks as opposed to several quarters if they were to do it on their own. Second, the Converged Data Engine enables ingestion of all the data signals as aggregates across all the databases of a telco. Our ingestion code allows this to be an automated process while ensuring data quality and governance.”
The Converged Data Engine features built-in intelligence to suggest the next best action across sales and service for a customer, according to Vittal. It also includes a customer lifecycle management tool.
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