Telecom to lifestyle

Airtel not only wants to get to the next 100 million customers in three years, it hopes to cease being a telecom company—only. Kushan Mitra speaks to Bharti Airtel CEO Manoj Kohli and Deputy CEO Sanjay Kapoor to figure out the telecom giant’s future plans.

You’ve crossed a 100 million. What next?
Manoj: Well, the journey of the next 100 million will be very different. It will be far bigger, and far more enriching too. First, the next 100 million subscribers have to be added within the next three years. Secondly, we want our wallet share with our existing 100 million subscribers to increase dramatically.

You want subscribers like me to spend more?
Manoj: Obviously, yes (laughs). But the idea is that if you have 2,000 rupees in your wallet for telecom, broadband, television and music, why am I getting half of that wallet share? I deserve to get all of it if I make you, the subscriber, happy and have a trustworthy relationship with you. I want to be the provider of all three screens— mobile, computer and TV.

So you can get me to spend more money on Airtel?
Manoj: Not quite, I want the subscriber to spend more money on the product portfolio of Airtel. That money you could be spending on some other brand.

So if I have Direct-To-Home (DTH) today from another provider, you want to get that business?
Manoj: Yes, and also offer a better quality service and maybe at a better price.

But will mobile continue to remain the main driver of growth?
Manoj: I consider mobile to be the engine of growth, but behind that we will have a very strong product portfolio. Our portfolio is more integrated than AT&T or Verizon in the US. And that portfolio I believe will be able to satisfy the demands and needs of millions of Indian customers.

Your new consumers will increasingly be younger and poorer than Airtel’s current consumers. What will Airtel do to make them profitable?
Manoj: True, the next 100 million customers will be lower in terms of value than the first hundred million. And their viability has to be assured. They will come primarily from rural and semi-urban areas.

100 Million in 3 Years Airtel has crossed 100 million customers in 13 years and expects to add another 100 million by 2012. Here’s how: By expanding its Entertainment business—essentially its Direct To Home (DTH) services Rolling out its 3.5G HSPA network within six months of licences being allowed Increasing broadband subscribers by launching a low-cost computer with a bundled broadband connection Launching new products and services on their mobility platform, including a comprehensive mobile money transfer system Repositioning themselves as a ‘Lifestyle’ company

Today, 60 per cent of our incremental customers come from rural areas. Who knows in two years it can be 80 per cent. They have to be as viable as the first 100 million—that means our cost structures have to be leaner, our productivity better, so that we can give a similar or even better quality service at a lower cost.

How much more can you cut?
Manoj: We think there is still a large scope for cost efficiency and productivity. We haven’t yet garnered all the economies of scale for our hundred million customers.

As we move from 100 to 150 and eventually 200 million, economies of scale will continue to grow. We have to be more viable as we move to the lower strata of society. And what else?
Manoj: In the first 100 million we were an acquisitionled company and that too primarily in mobile. Now we will be an “integrated” company which will look at the customer lifecycle from end to end. We’re also talking of a product portfolio, which customers can pick up one by one according to their need. We’re talking of huge content that we need to give the customer, especially the youth and the rural customer. Rural and language content, for example. So now we need different capabilities. Media capability, retention capability, 3G capability, more wireless broadband capability. I feel that we are playing a new game. We have changed the game for the others.

You guys are very confident of there being another 100 million more subscribers for yourselves. How?
Sanjay: Because I still feel there are large parts of the country that are still under-penetrated. In rural areas, penetration is only 13 per cent. Look at the number of young people—over 560 million. This is massive and I really do believe that there is still a lot of headroom to grow. In nearby countries—Pakistan, Sri Lanka, Thailand, Malaysia—penetration levels are already in excess of 50 per cent. India is a prosperous country, I’m pretty sure we can keep on growing.

What about the “share of wallet”?
Sanjay: Our first experience with the share of wallet concept has been with music sales. Today, we are the largest “organised” retailer of music tracks. In the future, we will have stake in financial services, entertainment and retail. The onset of 3G, which will be HSPA (High Speed Packet Access) for us, will open up other avenues such as videos and gaming, which are under-tapped in India.

But handset vendors such as Nokia and Apple are also making a play as are third-party providers. How will you stand out? And how will you get consumers to pay, with rampant piracy?
Sanjay: Well, with technology moving from current 2.5G networks to a future 3.5G HSPA network things will also change, because music will move towards full downloads instead of ring tones and ring-back tones. Music videos can be downloaded as well. But addressing the larger question, like what happens to us with Nokia, Google and Apple also coming in, clearly the operators are not going to be dumb pipes. Bharti has been investing into capabilities that add value to the end customer. While some operators chose to become pipes we invested heavily in a service delivery platform.

The relationship with the customer belongs to me. Will you tie-up with them in certain cases?
Sanjay: We work with all of them—we sold iPhones. Google is a partner as well, and Nokia for all practical purposes is a strategic partner.

So, services will play a greater role in the future?
Sanjay: Services have always played a big role, but the nature of these services, given the conditions and nature of India, will undergo a dramatic change.

Particularly with higher speed networks?
Sanjay: Higher speed is just a part of the issue. You don’t need higher speeds for mobile commerce. The fact that India still has 85 per cent of its population not accessing banks and if they were to be banked, if financial inclusion was to be a key agenda for the government, then the mobile phone will play a key role.