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Interview with Sanjay Kapoor, CEO, India and South Asia, Bharti airtel

September 30, 2011
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Bharti airtel has spent the better part of 2011 reinventing the airtel brand, realigning business processes and revising tariffs in several markets. Sanjay Kapoor, chief executive officer, India and South Asia, Bharti airtel, talks about the hyper-competition in the market, 3G services and future trends. Excerpts…

How did the company perform in 2010?

It has been both a challenging and a good year for Bharti airtel. We have maintained our market leadership position in the wireless sector with a revenue market share of more than 30 per cent. This is despite a highly competitive market where the number of players has increased from 6 to 14.

Our revenues grew by 11 per cent year-on-year in financial year 2011, and we were also able to maintain our EBITDA (earnings before interest, taxes, depreciation and amortisation) despite significant rate drops and irrational pricing.

We refreshed the airtel brand to reveal the new face of our company, which is youthful, international, inclusive and dynamic. Our branding exercise was, perhaps, one of the largest of its kind. In India alone, over 400,000 signages were rebranded across various airtel outlets. We also launched an inspiring “Vision 2015”, informing all the stakeholders about the next transformation we aim for. Our vision is to ensure that by 2015, airtel will be the most loved brand, enriching the lives of millions. In line with this objective, we have incubated a number of potential revenue streams to include a digital media exchange, SaaS and mCommerce.

We have transformed ourselves from  a largely voice-driven company to a voice- and data-driven business. Our broadband and telephony business (Telemedia services) has emerged as the first business to have a greater share of non-voice revenues as compared to voice-based revenues. Launched in March 2010, airtel App Central now has over 100,000 applications, making it the largest operator-driven application store globally.

In the enterprise segment, we have implemented the shared services model for our networks, supply chain, finance and customer services division, utilising the group’s synergies across operations. This has enabled the company to scale up operations while maintaining margins.

We also created a global data portfolio with the launch of services in Thailand and Malaysia, and expanded our international points of presence to 13 and network coverage to more than 50 countries through our new cable systems.

What milestones do you hope to achieve in 2011-12?

In keeping with the company’s new vision of becoming the most loved brand and enriching the lives of millions by 2015, we will continue to focus on delivering a strong brand promise for our over 228 million customers across the globe.

With “emerging” becoming the new “developed”, the world’s focus is clearly shifting to India. Telecom in India is turning out to be an essential service that ensures smooth functioning of people’s daily lives and businesses, helping them become socially and financially inclusive as well as globally competitive. It is estimated that a 10 per cent increase in broadband penetration results in accelerating economic growth by 1.4 per cent. Moreover, with 3G becoming a reality, we foresee a further multiplier effect on the economy. We look forward to continuing airtel’s contribution to India’s telecom growth in the new fiscal.

In addition, while telecom penetration in the country has increased hugely, the rural market remains grossly underserved even today. With less than 35 per cent telecom penetration in rural India, there is ample scope to cover more ground. This will be achieved by taking basic voice connectivity to all parts of the country.

Internet and broadband services also need a greater thrust. In this segment, India today is where voice stood in 1994, with less than 1 per cent penetration. We plan to leverage the latest technologies – 3G, broadband wireless access (BWA) and LTE – to address India’s fast expanding data requirements.

Going forward, the emerging domains of m-commerce, m-entertainment, m-health and m-advertising will help to enrich the lives of our customers.

What was the rationale behind the tariff hike and what impact do you expect this to have?

Telecom is probably the only industry where despite increasing inflation, tariffs have been falling continuously. Declining margins, high 3G and BWA auction prices, spectrum constraints and rural rollouts have left us with little choice but to make some price corrections. We are committed to enhancing value for our customers through continued investments in network, technology, customer experience and life-enriching services.

What impact has mobile number portability (MNP) had on your business so far? Has the response met your expectations?

MNP has further consolidated airtel’s position in the minds of customers. According to the latest Clearing House data, airtel, with about 2.5 million port-ins, is leading the market in terms of gross port-ins. As a leader in the telecom industry, we are committed to continuously improve customer experience and further build on airtel’s value proposition of being “India’s network”.

We are witnessing an increasing trend of customers who moved out of airtel subsequently porting back at the end of the 90-day period. Network quality and customer service are the key reasons for our old subscribers returning to us.

Also, the series of many firsts when it comes to services (for example, the availability of iPhones, launch of HelloTunes, host of offerings under the Airtel Apps Store and m-commerce) will ensure that we are well positioned to gain customers from other networks under MNP. Today, every fourth MNP customer chooses airtel over any other network.

What has been the response to airtel’s 3G services so far?

The response to our 3G services has been great. Over 3 million customers enjoy our 3G services. With the airtel 3G advantage, we are witnessing a fast increasing propensity for using rich applications and video services, which have resulted in data consumption that are four times higher than those on the 2G platform.

3G customers are fairly accretive in terms of ARPUs and their propensity to  use data is high. We expect significant uptake of data services by Indian customers as has been the case in other parts of the world where 3G services have been launched. From an industry perspective, we foresee the market shaping up well to address future 3G requirements; more handsets, applications, content and improved access are now on the charts.

Having successfully completed our initial rollout plans, we are now trying to cover more areas (including Category C and D towns), where we have witnessed traction in EDGE services. We look forward to providing our mobile customers with the widest and strongest 3G network reach in the country, and ensuring better customer experience.

What are the challenges and concerns that need to be addressed going forward?

The Indian telecom industry is highly competitive and getting returns is difficult, which puts enormous pressure on the operating margin of the company. Also, being the market leader, we have to balance every significant step as we are answerable to our customers and stakeholders. In order to witness the growth of not only airtel but also of the industry as a whole, it is imperative to take appropriate measures to nurture this industry by enabling it to grow manifold and by contributing significantly towards the socio-economic development of the country. It is imperative that the National Telecom Policy, 2011 recognises this and facilitates the growth and sustainability of the industry.

What are the company’s plans with respect to its broadband business?

We are present in over 87 cities. Our focus has always been on cities that have a larger revenue potential. Going forward, we will be focusing on content and customer experience as the twin pillars of our strategy for leveraging broadband services to the fullest.

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