Business - In Conversation with Manoj Kohli;Airtel

With Reliance Communications and Tata Teleservices readying to launch their GSM cellular services within a few months and another five to six players also readying to enter the market, another tariff war is on the cards. While average revenues per user (ARPU) are falling in existing 2G-type mobile services, the market for 3G will be opened soon, unleashing another flood of competitive pressure. So though Bharti Airtel has a 25 per cent share in the mobile market, Manoj Kohli who has taken over as its joint managing director and CEO faces some tough challenges. He explains his company’s strategy to Surajeet Das Gupta and spells out why it is getting into the unchartered area of entertainment — through IPTV and DTH services — where it will face tough and established competitors. Excerpts:
With 12-13 players per circle, how will the market change and how will you retain market share?There’s a lot more growth ahead since, as compared to the current 300 million or so subscribers, the government’s estimate is the market will rise to 500 million by 2010 — we think it will be a tenth or so higher. In any case, our goal is not customer share but is to get more revenue. The new players face the danger of being unviable — with a 30 per cent penetration already, this means the best 30 per cent of customers have been taken. Tariffs are already down to 70 paise a minute, so the new players will start with serious viability issues. I’m told that bankers are hesitant to fund new players. Globally, just three or four players are viable but since our market is bigger, I think five players can survive. I don’t see any of the new players being able to beat even the number five player today.
Won’t new players drop tariffs and grab your customers?I travel and see customers all over India and I think they’re agnostic to tariffs. And I’m talking of customers who want to spend as little as Rs 50 a month on telecom. Whether the tariff falls to 65 paise doesn’t matter so much. The customer knows he’s got a certain amount to spend and wants to be with the leader who brings in new products, who has a good brand, a good distribution network next to his house. Service quality, innovations and new products are the drivers, not tariffs.
Customer service levels, though, are very poor.We are attacking major touch points to improve service - customers want connectivity in the first and second basement, so we have put together a basement strategy; customers want phones to work in elevators, so we are putting an elevator strategy. Our call centres are moving to international BPOs. And we are looking at giving quality assurance to customers as we reach certain standards.
How do you see the 3G market evolving?With equipment and handset costs falling, 3G is an important technology. In this case too, the top 4-5 players will do well and the stand-alone 3G players will find it difficult. 3G will increase our ability to carry voice calls by 40 per cent — and voice is still the killer application. Europe got 3G when the 2G penetration was 100 per cent, ours is just 30 per cent. So the first objective here is to use 3G to do full voice penetration. There will, of course, be an overlay of data services in the top 25 cities to begin with. We think that the top 5 per cent to 10 per cent customers in large metros will adapt 3G in the first couple of years. And internet penetration in rural India will take place through mobile phones and not through either the PC or the laptop.
Why are you getting into non-telecom areas like DTH and IPTV? Is it because your telecom ARPUs are falling?Our studies show that after the three needs of food, clothing and housing have been met, people want telephony and then television. We’re not looking for just customer numbers since, as mobile penetration takes place, the numbers will automatically come to us. We’re looking at wallet-share. If a customer spends Rs 200 on telephony and entertainment, how much can we get? That share will come from a portfolio of products that we will offer him in this space. So I will give him a fixed line and broadband at home, mobility, television through IPTV and DTH, control the three screens and given him a uniform and consistent experience. Of course, there are synergies in the businesses with telecom — we can leverage our brand, our in-depth distribution and also our shared services, which make the business very viable.
Is the falling ARPU a serious concern?We are agnostic to ARPU. What we look at is the cost per minute, the revenue per minute and the margin we make. We are a minute’s factory and even if ARPUs decline it does not worry us as long as we sell more minutes.
Has your rural foray turned out as expected?
Lot of myths have been broken. For instance, we expected that the sale of e-recharge coupons in rural India would be low. But 90 per cent of the recharges in Bihar and UP which have large rural subscribers are through e-recharges. The second myth was that rural India is not brand conscious. But the reality is that the biggest mobile brand in rural India is Airtel and the highest selling mobile phone brand is Nokia. Three, it is almost as easy to get a connection in a village as it is in a city — virtually every village in India has five retail shops selling a connection. You don’t have to go to the mandi to get one.
Fourth, rural customers are as demanding when it comes to customer service. Of course, they don’t want pre-recorded interactive customer services in the manner we offer them in the cities — so we’ve trained the over nine lakh retailers we have in rural areas to answer customer queries.