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Airtel vs Jio in cheap 4G phone: Voice-data bundling coup waiting to happen

A model like Bharti Airtel-Karbonn partnering to bring 4G smartphones at a low cost should have come about a long time ago

Subhomoy Bhattacharjee  |  New Delhi 

Airtel Karbonn 4G smartphone
Photo: Reuters

One should not call it the first step, but the partnership between Bharti Airtel and Karbonn Mobiles to bring 4G smartphones at a low cost is something that should have happened a long time ago. Voice is absurdly cheap to carry over a 4G network where the play is on data. Airtel and Vodafone’s key competitor Reliance Jio has realised and played on this synergy right from the time it entered the market, in September 2016, offering voice services free to win customers. Airtel is now offering the same play on data with a hardware manufacturer. It should have been here much before, but Airtel stayed too tied to the abundant 2G spectrum it holds and is the leader. Telecom Service Providers (TSP) had begun to sense the change quite some time ago. The change was that consumers want data and 2G cannot provide it. Surely, the TSPs needed to move in to exploit the capacity of the 4G spectrum to push more data to the consumer and not bother about the amount of voice traffic. A Bharti Infratel investor presentation says, "In developed markets, data usage by a 4G subscriber is often 2-2.5x of a typical 3G subscriber. India is already trending at 1.65x”. This means, betting on 4G and possibly leaving the 2G spectrum as the less invested area. Internet of Things (IoT), too, scales much better on the former. The choice was made even more one-sided in February 2016, when the sector regulator, Telecom Regulatory Authority of India (Trai) forbid differential tariffs —the net neutrality order. The regulator said the TSPs i.e. Bharti or RJio cannot exercise any control over the home screen of the customer’s mobile. It chooses the line of access. The only control comes only from the manufacturer of the mobile. It immediately made sense for the TSPs to tie up with the manufacturers to reach her mobile first. Yet Airtel and even Vodafone, the first-and second-largest networks in India delayed the move. Why? Because the incentives were perceived to be low. At least it was low, till RJio came into the market. Yet bundling of voice and data for those at the lowest rung of the mobile market was a marketing coup that was waiting to happen, as the cost dynamics had changed.

It is similar to what happened with the short message service (SMS) market globally, which was ended by WhatsApp. One of the reasons these delayed was of course due to government policy. In FY17, the central government earned Rs 22,492 crore from the license fees. Of this, Bharti and Vodafone accounted for 60 per cent. Investment in closely packed towers was costly. As Sunil Mittal, chairman of Bharti Group said recently at the World Economic Forum in New Delhi. “My own company has spent $3 billion this year only on network capex. This is significant. This is significantly higher than $1.5-2 billion we do every year”. The money would now flow in. It was needed yesterday. Vodafone MD and CEO Sunil Sood also said, “We are already the largest IoT player in Europe, we already have 60 million SIM cards in IoT and we running a huge automotive car project across Europe, we are single largest automotive player in Europe. One out of two cars runs on Vodafone SIM card which is manufactured in Europe”. Yet it is only now that his company has begun to bring some of those into India. “We have already put the stake on the ground….which means we go beyond just offering connectivity dump and occupy some of the spaces which is this convergence world would need”. There are some hassles, though. Under the existing mobile virtual network operator guidelines, the government collects license fees twice, from the TSP and the partner. It has to change. But without waiting for it to change, Bharti has jumped in proactively tying up with Karbonn. There are some other inherent glitches, though. When voice and data are priced the same, who needs a dual SIM. It was meant to leverage the earlier differences. Overall, this afternoon brings good news for the Indian telecom sector.

First Published: Thu, October 12 2017. 10:33 IST