Bharti Airtel takes challenge to Reliance Jio in broadband service

Operator seeks to expand FTTH service to 40 million homes across 1,000 cities

Bharti Airtel is about to embark on a massive expansion in its fibre-to-the-home (FTTH) broadband service, in collaboration with local cable operators who will provide the last-mile connectivity. The company plans to offer the service in over 1,000 cities across the country, in the next 12-18 months.
 

A senior executive of the company said the target was to reach over 40 million of the 240 million households in the country.
 

The move will bring Airtel into a head-to-head battle with Reliance Jio, which offers its FTTH broadband service in 2,000 cities and is looking to reach 50 million homes.
 

Airtel has already tested the model in close to 50 cities, and is all set to expand on a massive scale. The alliance with cable operators will provide Airtel with last-mile fibre connectivity to homes, for which the operators will get a revenue share. They will also maintain the fibre infrastructure. The rest – revenue management, customer servicing, content, and hardware — will be overseen by Airtel.
 

“Currently, broadband at home has an ARPU (average revenue per user) of Rs 700. Assuming that each household has three mobile connections of Airtel and also takes our DTH connection, Airtel would be able to garner an ARPU of Rs 1,700-1,800 from each home,” a source aware of Airtel’s strategy said.
 

Airtel had been going slow on home broadband. It has taken them several years to go to over 120 cities and reach a subscriber base of only 2.6 million. The plan now is that while it will continue to run and expand the FTTH operations in these cities on its own, it will take the collaborative route elsewhere.

 

Many cable operators are already aligned with large MSOs (multi-system operators), and Jio, which has acquired MSOs like Hathway and Den, and is a major player in the game. However, a vast majority of the cable operators are independent.

“Cable operators work for everyone and are independent entities. They are not in any exclusive deal with Airtel but will get into similar arrangements with the competition also,” an Airtel insider said.
 

Airtel is also looking at ways to monetise its digital platforms, Wynk, Xtreme, and Airtel Thanks. These, sources said, have together garnered over 165 million active customers per month. The company is already offering customers financial services and content, and will add other products to the stable. However, unlike Jio, it will not get into pure e-commerce (grocery, lifestyle, etc) as this requires investments in the front end.
 

What's more, the company is cashing in on this active subscriber base to generate advertising revenues. The feedback from advertisers is that it is able to target better-quality customers compared to other OTT (over-the-top) platforms.
 

Airtel has also been at the forefront of the push to increase tariffs. Sunil Mittal, chairperson of Bharti Enterprises, has stated that the ideal ARPU should be Rs 300 for the telcos to get adequate return on their capital. But sources say that the company feels that since it is already at a premium against Jio (around 20 per cent), it should not make the first move for another hike and make itself uncompetitive.
 

Jio will not make the first move either, sources said. This means that the status quo will remain, and the industry will not see a rise in the return on capital.
 

Insiders are of the view that Airtel will continue to get and hold quality customers. The company does not see any major challenge from the announcement of new post-paid tariffs by Jio. A source close to Airtel said Jio had only increased its tariff and added some OTT platforms, but it had not unleashed a price war.
 

Sources in Airtel also said that while the company would buy some additional spectrum in certain circles to supplement its position when the auction takes place, it does not face any shortage of spectrum at the moment. Especially as it is re-farming 2G and 3G spectrum to 4G.
 

Rival Jio has been pushing the government to speed up the process of auctioning spectrum.