Airtel's champion against Jio-Facebook alliance - a digital platform of its own

KEY HIGHLIGHTS

• Airtel's 3-year-old digital platform venture is being seen as its answer to Jio-Facebook alliance
• Much like Jio-Facebook, Airtel would harness its subcribers' data to create new revenue streams
• Airtel employs 1,200 people on the digital platforms side, and could create meaningful revenues over 12 months
• Airtel says it will still be positioned as telco with no plans to transform into a tech company

On Monday, the country's top telecom operator Bharti Airtel reported net loss of Rs 32,183 crore in FY20, primarily on account of reassessment of a regulatory cost in the one-time spectrum charge (OTSC) matter, and the earlier provisioning of the adjusted gross revenues (AGR) dues.

A day later, on the earnings call, Gopal Vittal, the CEO of Airtel, said that even though the telco has no plans to transform into a tech company - like Jio Platforms which has re-positioned itself as tech and consumer company to attract global investments - it is trying to integrate tech and telecom to build a digital platforms business which is going to be its answer to the newly-formed Jio Platforms-Facebook alliance.

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But how the digital platform strategy of Airtel is going to pan out? Airtel's digital platform is a bouquet of services and products - either offered by the telco itself or through partners - that ride on top of its network. The company has been quietly building this business over the past three years. In June 2017, Airtel first rolled out a dedicated digital platform to serve SMEs and start-ups for their growing need of connectivity, communication and collaboration requirements. Then, last September, it launched Airtel Xstream, a digital entertainment service, just three days before Jio's home broadband service, JioFiber went live.

Much like the Jio-Facebook alliance, Airtel too plans to harness the data of its subscribers to do target selling of products (for its partners) and for advertising. For instance, the telco has tied up with Bharti AXA and HDFC to sell insurance products to its subscribers, and claims to be one of the largest sellers of life insurance policies at the moment. Similar tie-ups are likely in areas like education, content and lending, where Airtel would earn commission on transactions.

"With our (digital) platform, we have been a partner of choice for several companies. In the B2C (business-to-consumer) area, we have partnered across content, financial services and devices. We have leveraged our platform to drive growth for Zee, Star, Netflix, Amazon, Eros, HDFC, AXA, and a host of start-ups. On the B2B side, we have leveraged our platform to drive new streams of revenue. We have built partnerships in the work-from-home area, in cyber-security services, delivering managed networks, IoT (internet of things) and delivering cloud services. Our partners here include Cisco, Google, Zoom, Microsoft, Palo Alto Networks, and Symantec," said Vittal.

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To scale up its digital platforms business, Airtel has been betting on four pillars: data, distribution, payments, and network. On the data side, the company has a wide repository of data which it collects from its large subscriber base. But how this data can be monetised? Through algorithm and data science, the telco believes that it can convert its subscribers to buy other services like insurance or lending products.

The company says that its distribution size is huge enough to build scale for its digital platform venture, and it can attract global and domestic businesses to partner with it. For instance, Airtel currently has access to over 280 million mobile users, over 18 million homes, 2,000 large corporates, and over a million small and medium enterprises (SMEs).

While Jio has plans to get into last-mile retailing through its JioMart business, Airtel says it will stick to just mining subscriber data, and let its partner offer products and services.

"Airtel's digital venture is fairly new, and the company has been running pilots for some of its projects over the past few years. It has been actively engaging with partners like Google to target SMEs with cloud-based solutions. With Jio's deal marathon, Airtel would be looking at changing its narrative," says a telecom consultant.

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Though digital platform has been gaining some traction of late. For instance, Airtel Thanks, Wynk and XStream, which are part of the digital platform venture, have 150 million monthly users. Its app for offline retail agents (called Mitra) is witnessing 1.1 million transactions daily.

Even as the telco maintains that it's going to remain a telco, the advantages of repositioning as a digital or tech company are huge. In the last earnings call of RIL (Reliance Industries), its CFO Alok Agarwal had said that three tech companies in the world - Apple, Amazon and Microsoft - command a market capitalisation of $1 trillion each which shows that global investors value tech companies more than other themes.

Airtel has a talent pool of 1,200 people on the digital platform side, and the company claims to generate a meaningful revenue stream for this business over the next 12 months. At some point, when this vertical gains significance, it might be hived off into a separate 'Airtel Digital' company.

"The future of our platform will be to have a foundation of a customer-focussed telco that can allow us to deliver us a range of services in partnership with thousands of companies. All of this must be done with a passion for data privacy," said Vittal.

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