Mittal had shared thoughts on various aspects of the telecom business, including his view of the industry structure and tariffs, 5G, smartphones / devices, among others.
According to Goldman Sachs, Mittal said that although Jio has received investment from a number of players, this puts Airtel at a disadvantage.
Bharti Airtel will look to upgrade its Payment Bank license to Small Finance Bank – this could allow lending and increase the size of deposits (which are currently limited to $ 1,500).
Mittal informed Golman Sachs that Airtel was seeing a lot of traction for its Payment Bank; the company owns one of the largest branch networks in India, with billions of dollars in monthly throughput. “Bharti was able to reduce the churn rate of its mobile customers thanks to this offer.”
The Sunil Mittal-led telecom company looks to low-end smartphones, but mostly in the form of partnerships and bundled data. Mittal told Goldman Sachs that the company has stayed away from device subsidies in the past and will continue to do so as it views it as a cost drain.
The high customer churn rate and low fidelity don’t justify the investment in devices,
mainly because ARPUs are very low in India. Bharti Airtel will not be engaged in the production of devices or equipment.
“… as we have pointed out in the past, we do not see Jio’s launch of smartphone or 5G services as a negative for Bharti; our analysis suggests minimal impact due to the launch of subsidized devices and we believe the 5G device ecosystem will take a few years to mature in India. We remain constructive on Bharti and see current levels as a compelling buying opportunity, “Goldman Sachs said in the statement.
Bharti Airtel believes the ARPUs would have already hit Rs200 if COVID hadn’t happened and believes the company should get there in the coming months.
According to Mittal, the ideal ARPU for the industry is Rs300, but he said it might be a longer journey to get there. ARPU at Rs300 does not mean there will be no offers for consumers priced at Rs100 and the company believes that high-end customers should be able to pay US $ 6-8 per month.
Mittal said Airtel will not raise tariffs at the expense of market share.
Bharti Airtel believes the current industry structure (4 players) is ideal, but expects market share to consolidate further; believes that the first two operators can reach a market share of around 80% (currently around 75%) in 12-18 months.
“Bharti Airtel’s execution continues to be near flawless and we have been encouraged by the closing of the incremental market share gap between Bharti and Jio. While a rate hike is inevitable in the short term in our view, given Vodafone Idea’s strained balance sheet, we see Bharti continuing to gain market share in the meantime; the company’s current market share of around 32% can potentially rise to a medium-high 30% in the near future if rates don’t rise rapidly, “Goldman Sachs said in the note.
Mittal does not expect a substantial difference in market share between the top two players. The company’s focus is on superior quality customers and has consistently been able to attract and retain mid-to-high end customers.
The telecom company also believes that if spectrum prices remain at current levels, it may not participate in auctions in 2021.
However, by 2022, Bharti Airtel may need to purchase 5G spectrum and expects the 5G rollout to start happening in 2-3 years at least in major cities in India.
Mittal said there aren’t enough use cases for 5G at the moment and that devices will need to be more widely available at lower prices for 5G to happen. The company doesn’t think 5G will lead to incremental investments as it will simply be replaced by a reduction in 4G investment.