Bharti Airtel chief executive Gopal Vittal expects pricing of mobile services to rise in the next five-to-six months with the rapid emergence of three equal-sized telcos following recent government approval to the Vodafone-Idea Cellular merger.
The present pricing scenario is completely unsustainable in terms of return on investment (RoI) for all major telcos, and any further “pricing destruction would hurt everyone in the industry that has already suffered sizeable revenue erosion”, Vittal said on Friday.
“Pricing should start lifting in the next 5-to-6 months with the emergence of a three-player market with equal strength, especially with the Vodafone-Idea merger going through,” he said on an earnings call.
Vittal, however, conceded that pricing remained “a function of competitive dynamics”.
The telecom department had on Thursday given final approval to the merger of Vodafone India and Idea Cellular, which will create the country’s largest phone company by subscribers and revenue.
Airtel, the present telecom market leader, eked out a modest Rs 97.3 crore consolidated profit in the June quarter, helped by a one-time exceptional gain, but suffered heavy losses in India amid mounting pricing pressure.
The telecom industry has been in the throes of a prolonged price war since the entry of Reliance Jio Infocomm nearly two years ago, which, in turn, has hastened market consolidation, culminating in the emergence of three dominant players – Airtel, Jio and Vodafone-Idea combine.
Vittal said Airtel would ramp up capex spends to reinforce its home broadband offerings for countering Jio’s ambitious fibre-to-the-home (FTTH) services launch likely later this year.
“Fibre-based home broadband is an under-served market and we will step up investments in this space, targeting 2-to-2.5 million fresh home passes or `new households’ this year,” he said.
Airtel, which is the second-largest wired broadband player after state-run Bharat Sanchar Nigam (BSNL), has already started offering hefty discounts to home broadband users across India in a bid to hold on to its 2.5 million-strong active wired broadband customer base.
Vittal, however, said “content monetisation remained a challenge”, adding that “the company would be careful” about making direct content-related investments in future. “We would prefer alliances (with key partners) to drive our content offers to customers rather than direct investments,” he said.
He also hinted that the Sunil Mittal-led carrier does not see Jio’s low-cost 4G feature phone, the Jio Phone, as a threat. “The new feature phone (read Jio Phone) may be taking some market share, but Airtel’s top priority is getting the right quality customers and ring fencing high ARPU users,” Vittal said.
Airtel’s top executive also dismissed the likelihood of the market leader doling out more goodies to hold on to its sizeable feature phone user base, saying the company “is averse to the idea of offering subsidies to customers who don’t have the potential to upgrade”.
Responding to analyst queries on Airtel’s plans to defend its feature phone user base from Jio’s aggressive pricing overtures, Vittal also said the company would continue to watch the feature phone user space carefully “to identify high-ARPU users and ring fence them with attractive bundled offers”.
Incumbents Airtel, Vodafone and Idea have millions of 2G feature phone customers that Jio is trying to woo away with its Jio Phone offers.