The Heat is on
Sunil Mittal said Reliance Jio Infocomm’s proposed launch is driving consolidation in the telecom sector and will intensify pricing pressure but that Bharti Airtel is prepared to meet all competition.
In an exclusive interview with ET, Bharti Enterprises chairman Mittal expressed the hope that Reliance Industries, which owns Jio, will be prudent.
Jio’s long-awaited start is expected to disrupt tariffs as it seeks to wean away lucrative data customers from existing companies with its 4G services.
Jio is also expected to bundle cheap devices with the content that it has access to, posing a threat to incumbents led by Bharti Airtel.
“Should we be concerned about Jio? I think we should be about all kinds of competition, be it Vodafone, Idea or Jio and yes, when Jio is coming in, one has to take it up very seriously,” said Mittal, 58.
“Let me say we are prepared to face the onslaught. We have a large pool of airwaves across bands. We have a very extensive network now… Airtel has committed.`16,000 crore this year, the largest capex ever.”
Mittal pointed out that market leader Bharti Airtel’s return on capital employed (ROCe) was in single digits, which meant this measure was lower or negative for other companies.
“In this scenario, how do you think a price war will affect the health of the industry? We only hope that Reliance, which is very prudent and seeks returns for its shareholders and its investments, will be prudent but we will be being too optimistic if we say they won’t have some price pressures,” Mittal said.
“Ultimately, they are entering the market and will do something for acquiring market share. So, I hope it is within reason.”
The market leader has been girding itself for competition, rolling out 4G services and flooding the market with 4G sim (subscriber identification module) cards as it seeks to migrate existing customers to the highspeed network. Bharti Airtel is seeking to improve call quality by expanding the tower network and laying more optic fibre.
“By March, Airtel would have deployed 70,000 base stations (BTS), which is once again the largest-ever deployment anywhere outside China,” Mittal said. “This translates into 6,000 BTS a month. Fibre digging is going on, device tie-ups are underway.”
Shakeout in market
Jio’s imminent entry has spurred moves toward a shakeout. “I think the consolidation could lead to about five or may be six operators in the market,” Mittal said. These are likely to be Bharti Airtel, Vodafone, Jio, Idea Cellular, BSNL/MTNL and at best one more operator, possibly arising out of a merger of some smaller telcos as the sixth possibility, he suggested.
“Videocon recently sold some airwaves, MTS folded into Reliance Communications (RCom). We read in papers that RCom is signing some spectrum deals with Jio, so some alignment could be in the works,” Mittal said, leaving smaller operators such as Aircel, Tata and Telenor. “These three will have to decide what to do — merge or acquire?”
Mittal said Bharti Airtel was committed to net neutrality like all other telecom companies and the zero-rating plan it initiated earlier this year was in conformity with this.
Net neutrality refers to access being allowed to everyone equally by Internet service providers. Zero rating refers to free usage for specific applications, which was criticised by some as being discriminatory.
“In the US, net neutrality laws have permitted zero rating. The European Union has specifically allowed zero rating. However, if our country decided against it, we are perfectly comfortable with it,” Mittal said. He added that zero-rating plans were meant to simply help smalltime entrepreneurs market themselves to customers.
“Say, take the case of a small pizza company that is coming up. Why would anybody pay for data and browse through that pizza company’s website?” he said. If browsing was free for users, they might go and see the website and it might provide an opportunity for the small entrepreneur to get noticed.
On spectrum caps, Mittal said the recent proposal floated by the regulator to club all the sub-1GHz bands into one for the purpose for calculating limits could create 100% monopolies in certain bands.
“I don’t think my children are ready yet. My daughter is unlikely to come back and both my sons are busy pursuing their interests at this point,” Mittal said.