Last week, Bharti Airtel, India’s largest mobile operator by subscribers, announced the launch of 3G Mobile services in the National Capital Region (NCR), across Delhi, Gurgaon, Faridabad and Noida. Delhi is home-base for Airtel, and the launch follows previous launches in Bengaluru, Chennai, Coimbatore, Mysore, Manipal, Udipi and Jaipur, where it has managed to acquire half a million customers on 3G. Airtel is targeting 40 cities by the end of this month, and 1000 cities by the same time next year, Atul Bindal, President (Mobile Services) for Bharti Airtel told us. In Part 1 of this two part interview, Bindal talks about data trends since 3G launch, and the companys approach to 3G in terms of on-deck versus off-deck, and 4G-LTE.
Q: What are the Data trends that you are observing in the market?
Atul Bindal: We thought that we were adequately prepared to ride this wave, but quite frankly nothing could have prepared us for the kind of reception and the response that we have received in the first few weeks, both in terms of the surge, the quantity, as well as the quality. I’m also particularly pleased that we did take the time that we did take in terms of opening each of these cities. I’m not saying this just for effect – we could have been standing up in October and actually announcing 20 cities open, because everything was in place – but our learning from our partners in SingTel and others in the Western World is that actually 3G is not about launching nomadic network here and there. It is all about ensuring contiguous and seamless coverage, investing in each and every element of network, and I should know because I used to run the Telemedia business for Airtel.
Sometimes the customer gets frustrated because he is trying to do a transaction on the net, or his browsing experience is not coming through. He is not being able to understand that it’s actually a very complex ecosystem which is getting stitched together at the backend.
Now if you were to think of an ecosystem which was meant primarily for voice, then Edge and GPRS came on top of that and if you’re saying you’re taking it up to 21 Mbps capability, then each and every part of that ecosystem needs to get upgraded and enhanced. We would continue to play catch up with that. I still believe surges would be there and we would need to add more and more as we go along. But, a city like Delhi, where there are almost 2 Airtel connections in every home, it does require 1800 or so sites. I know there are operators who have probably launched 500-600 sites or even lesser, and are declaring cities open. That’s not the right way to do it. If I want to sum it up in just three words, I think its deeper rather than wider. Get a city right, move to city number two. Don’t take me wrong, we do want to be across the length and breadth of the country, we’ve spent Rs 13,000 crores on this (3G). But we have to get each market right.
Q:What sort of network coverage will you have in terms of percentage of total?
Atul Bindal: In NCR, it’s well over 80%, maybe 80-85%, beacuse the beauty of the 3G network is that it is WCDMA, and the spectral efficiency is much superior. Therefore, with a much lesser number of sites you are able to cater to and address a much larger area. For example in Delhi, we have 5000 sites on 2G including the in-building solution. But we don’t require that many sites to cover 3G completely. There will be 2000 sites by the same time next week in Delhi, it will give us well over 82-83% of the market potential coverage and we’ll continue to increase as we go along. Maybe its 2500-3000, and thats a learning from the Western World as well.
Q: One of the things that we noticed in case of the Bangalore launch, there were quite a few hiccups in terms of enabling 3G services and issues with connectivity. There were complaints from users on Twitter that GPRS speeds went down, GPRS-Edge suffered after 3G launch. What happened?
Atul Bindal: I’m taking that feedback back with me so that I can get back with a specific response. As far as the provisioning piece is concerned, you know, we have to keep in mind that the device eco-system is still not standardised. There needs to be, literally for each device, a device specific customized provisioning and activation. We have made an arrangement by which you can send a number, and by which we are able to intelligently identify what device have if you are an existing Airtel 2G customer, and we can tell you what is the extent to which your device is already 3G friendly. This interface has taken us some time.
The second bit which also happened is, that 3G and number portability happened almost at the same time. That actually also led to a certain amount of load building on the call centers, the technology systems on account of number portability, which was taking place in the voice part of the segment. That has tended to stabilise much more now.
Now, as a result of 3G, should the GPRS or Edge experience go down – I don’t see any reason for that to happen, but we will examine that. What we have done for example in the city like Bangalore, we have taken a map and have plotted the density of consumption which we were getting on GPRS and Edge, we have also plotted the commercial business districts. We have also plotted the handset distribution, in terms of what kind of handsets are there in what part of the city. Accordingly, the number of evens that we have provisioned, which was really the backhaul, key drivers of the experience. There is a way by which we can dynamically monitor that. But I owe you a specific response and will get back.
Q: What sort of data usage you’re seeing from users on GPRS/Edge and what are you expecting in case of 3G. Any number for average or median consumption?
Atul Bindal: If you take Bangalore and Chennai alone, in the first 10 days itself, we had over 150,000-200,000 customers in 10-12 days. The daily consumption of data on day seven crossed 1Terra Byte per day. Just to put that in context, is an extremely high percentage of the total 2G data consumption that we have, not just in those 2 cities but across the whole country. It is almost like as if the pipelines were clogged and now as the diameter of the pipe goes up, gush, the flow increased. This is all happening when we had not even really launched our Dongle side completely, because you know that is the other piece that leads to surges.
Today as we speak we have well over 500,000 customers. We have data consumption continuing to come in at a very brisk pace. I have to share that the video appliications seem to be very popular. Maybe its an initial surge, whether it is video calling or mobile TV etc, but going forward I think we should see, hopefully they will settle down and essentially accessing the net, using your email, connecting with friends, messaging and browsing; Those would be some of the key applications. We also have these three verticals, M-entertainment, M-Commerce and now M-health. So each of these three starts providing those applications which in a way become the fuel at the end of the 3G pipe.
Q: Do you think India might turn out to be an anomaly in case of video calling?
Atul Bindal: I won’t say so. I would probably still say that I think there is a lot of initial enthusiasm. For the first time I can look at you and talk rather than just hold the phone to my ear. But, I think there is a hell of a lot more now you can do with this phone. Those would grow at a much faster pace. Video Calling might a good niche application, but if you ask me whether it surges ahead to become the largest runway. Maybe I’ll be proved wrong.
Q: What do you think will be the largest?
Atul Bindal: You know what, we have had this strategy for a number of years now, even when the rest of the industry and our competitors were talking about owning content. We believe that the walled-garden strategies are fundamentally flawed. The best way is to create gateways, and to ensure that we can leave our customers at the gateways in the most effective manner. We are an access company. We will ensure that we bill you and deliver quality access. After that, we will give you a number of different options, which would be through applications. Which would make it easy for you to navigate and consume content, but you choose your content. You choose what it is that you want to eat at what point in time.
Q: How do the data margins work for you, as opposed to on-deck VAS margins, and whether this is going to affect on-deck VAS? I believe VAS is a significant contributor to EBITDA margins…
Atul Bindal: No, I would argue against that. That statement is a bit of a spurious statement. It’s a little bit like saying that there is a bedrock which is the 2G and the voice, and the cost is attributed there. And then there is VAS on top of that, and it doesn’t require… for example, I have launched 1800 sites today. These aren’t new sites, they’re 1800 2G sites with a 3G ecosystem. What cost should I attribute to it? Should I only attribute incremental costs, then we should just say that this is the incremental margin. You have to attribute costs from the bedrock also. 3G will be margin accretive, because it would allow operators to differentiate on the basis of network and service experience, because the voice quality will be superior, with better spectral efficiency. As a result of that your retention will be better, and churn should go down, and data ARPU will build up, because the arteries are now not clogged.
Q: Do you see data consumption taking away from or cannibalizing non-SMS VAS?
Atul Bindal: No, it will complement that. If you’re asking me three years from now, there will be a very large percentage of handsets which will be non-3G handsets. Therefore non-3G, non-EDGE handsets will attract a lot of non-voice service. We would need a way to reach that ubiquity, by which the bottom end of the market still gets to enjoy non-voice services. It will be a blend of both packet-switched and circuit-switched market. Even in western markets, 2G continues to be a reality. At Ericsson and Nokia Global headquarters last year, their Chairmen and CEO’s were sharing with us how even in 2016 and 2017, there will be 2G networks even at that time. We’re entering a world of AND, rather than OR, with 2G, 3G AND 4G.
Q: How does 4G impact you?
Atul Bindal: It will sit very nicely on top. It will not take 10 years to come, unlike 3G. As data starts building up and 100mbps type of applications, you’re talking about a completely different environment, and we believe that India enter the LTE environment sooner rather than later. Also, don’t forget that the current equipment and device prices are very high for LTE. Scale and volumes will bring it down, and scale and volumes reside in India and China. If I were you, I would expect LTE to happen sooner rather than later, but it will complement, rather than substitute.