The spectrum deal between Bharti Airtel and smaller telecom network operator Videocon for $0.66 billion or INR 44.3 billion is aimed at improving 4G network coverage amid anticipated competition from the entry of Reliance Jio.
Mukesh Ambani-promoted Reliance Jio Infocomm is expected to launch 4G during the second half of 2016. It will target 4G coverage in around 20,000 towns. Airtel has expanded its 4G coverage to nearly 400 towns in the last four years. On the other hand, Idea Cellular said its 4G coverage is nearing 350 towns after going live with the 4G services in December 2015.
The acquisition of 1800MHz spectrum in six Indian telecom circles will give Bharti Airtel the ability to offer 4G LTE services in 19 of 22 circles compared with Reliance Jio, which has access to 4G spectrum in all 22 circles. Vodafone has 4G spectrum in five circles. Idea Cellular has 4G spectrum in 12 circles.
Bharti Airtel noted that its data usage is doubling annually while data average revenue per user (ARPU) per month has increased to over INR 200 – higher than voice’s INR 137.
Fitch Ratings said Bharti Airtel will fund the INR 44.3 billion spectrum acquisition from the sale of operations in Burkina Faso and Sierra Leone to France’s Orange.
Bharti Airtel’s ratings have moderate headroom, given its plan to sell non-core assets despite higher competition and Capex (capital expenditure) requirements in India. These include its struggling Bangladesh business and operations in two additional African markets. Bharti Airtel plans to invest $3 billion annually over the next three years to improve voice and data networks.
Earlier, Idea Cellular, the third-largest telecom operator, showed interest in acquiring Videocon’s spectrum in two circles for INR 33 billion, but the deal collapsed as Bharti Airtel agreed to acquire the same.
Bharti’s acquisition price of INR 44 billion is about 65 percent higher than the regulatory auction reserve price – adjusted for the residual life of 16 years – as the spectrum is contiguous to Bharti’s existing spectrum in 1800MHz, Fitch Ratings said.
Fitch said the entry of Reliance Jio will intensify the competition. The industry blended tariff should fall by 5 percent-6 percent as Jio’s entry will arrest the rise in data average revenue per user (ARPU) despite rising data usage, and as voice ARPU will continue to fall due to data cannibalisation.
The top four telcos’ average operating EBITDA margin will narrow by 100bp-200bp (2015: 35 percent) due to pricing pressure on the higher-margin data services and a rise in marketing spend as data competition rises.
Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications are likely to raise their revenue market share to 80 percent from 77 percent last year.
Unprofitable telecoms such as Videocon, Aircel and Tata Docomo, could exit, given their unviable business model, now that they are able to sell their under-utilized spectrum.
The deal with Videocon reflects the successful strategies of Sunil Mittal in the Indian telecom market place.
Baburajan K
editor@telecomlead.com
Dear Sir,
Ways to REVIVE BSNL AND MTNL and ensure most people prefer to use its services. The following mentioned below needs to be done in order to bring about a radical difference in the way consumers perceive BSNL.
It is indeed very nice to hear from the telecom minister that you are “ready to sit and sell” BSNL SIM cards.
I would like to draw your attention to the fact that BSNL and MTNL need to think about advertising and marketing. Look at the private players, they do a lot of advertisements and hence most people prefer to take and use their services.
There are many reasons:
1. A lot of advertising through all mediums make people aware of what they have to offer. On the other hand, in spite of the fact that BSNL and MTNL is doing a lot, no one gets to know about it. We get to see BSNL and MTNL advertisements only on Doordarshan channels, which not every one watches. You need to put advertisements during prime shows, movies, prime time and matches about BSNL landlines and mobiles and then you can see the difference.
2. The quality of customer service along with complaints. Most people who have used BSNL and MTNL landlines and mobile phones in their lives share a bad and bitter experience. They say, that if there is a fault, and one wishes to make a complaint to have an engineer to come over and repair the fault, most people at BSNL and MTNL refuse to hear out the customer’s problem, because they believe it is SARKARI JOB, kuch nehi hota. Job to nehi jayegi…kaam karenge ya nehi karenge, puri salary to aajayegi..I have a personal experience. When my landline went down, I had to make multiple calls and book a complaint, employees disconnect calls on our face and refuse to register a complaint. Even if they do, no one addresses it and hence I had to stay without landline connection for almost 13 days. And to top it all, I was sent a bill for the whole month, whereas private players apologise, look into the issue, work on it and if need be give a waiver for the number of days that services could not be provided. Also pass some financial or other benefits as a goodwill gesture.
3.Calls must be recorded just like private operators so that quality can be maintained and negligent employees could be punished. You must create a mechanism to push and pressurize employees to work.
4.BSNL and MTNL must open up stores everywhere in the country like Vodafone and Airtel stores, where customers who are willing can purchase new SIM cards, walk in for any help required. At the present scenario, even if customers wish to buy connections, we do not know where to go. Small stores say, that they do not keep sarkari connections….woh to bakwas hote hai….take the private ones.
5.SALES team-You must create a sales team just like private players who would correctly identify, target the right audience and sell new connections through different medium especially telephone calls.
6.Incorporate the concept of “CORPORATE CLOSED USER GROUP (CUG) connections. These days if you look around, most people in private organisations have a dedicated sales person who sits at the office premises selling corporate connections, where a lot of benefits are provided to corporate employees including free calls within the organisation employees.
I am sure sir, if the above measured steps are taken and implemented, BSNL and MTNL will be able to compete stiffly with the private players. I am sure if you take out some time and work on this, you will WIN…
Please do something to improve the quality of service of BSNL and MTNL. you know what if British Telecom, being the state run telecommunication service provider it the UK reach great heights, why can;t we?
Regards,
Partha
New Delhi