Mittal shared thoughts on various aspects of the telecommunications business, including his perspective on industrial structure and tariffs, 5G, mobile phones / devices, among others.
According to Goldman Sachs, Mittal mentioned that although Jio has received investments from a number of players, this does disadvantage Airtel.
Bharti Airtel will seek to improve its license from Pay Bank to Small Financial Bank – this could enable lending and increase deposits (which are currently limited to US $ 1,500).
Mittal informed Golman Sachs that Airtel has pulled a lot of its Pay Bank; the company has one of the largest affiliate networks in India, with billions of dollars every month. “Bharti has been able to reduce a decline in its mobile customers due to this offer.”
The telecommunications Sunil Mittal looks at few mobile phones, but mainly in the form of partnerships and group data. Mittal told Goldman Sachs that the company has stayed away from appliance subsidies in the past and will continue to do so as they view it as a cost relief.
High customer and low loyalty does not justify investment in devices,
especially since ARPUs are very low in India. Bharti Airtel will not engage in the manufacture of appliances or equipment.
“… as we have emphasized in the past, we do not view smart or 5G services launched by Jio as negative for Bharti; our analysis suggests minimal impact due to launch of subsidized devices, and we believe the 5G device ecosystem will last for some years to mature in India.We remain constructive at Bharti and see current levels as a compelling buying opportunity, ”Goldman Sachs said in the note.
Bharti Airtel believes that ARPU would reach Rs200 already if COVID did not happen, and believes that the company should reach it in the coming months.
According to Mittal, the ideal ARPU for the industry is Rs300, but mentioned that it could be a longer journey to get there. ARPU at Rs300 does not mean that there will be no offers for consumers at a price of Rs100, and the company believes that high-end customers have to pay US $ 6-8 per month.
Mittal said Airtel will not raise fares at the expense of market share.
Bharti Airtel thinks the current industrial structure (4 players) is ideal, but expects market share to consolidate further; it is believed that the two main operators can end up with about 80% market share (currently around 75%) in 12-18 months.
“The execution of Bharti Airtel is still almost flawless, and we were encouraged by the closure of the increasing market share gap between Bharti and Jio. While rate hike is inevitable soon in our opinion, considering the tight balance sheet of Vodafone Idea, we see that Bharti continues to gain market share in the meantime; the company’s current c.32% market share may be able to rise to a medium-high 30% s in the foreseeable future if rates do not grow rapidly, ”Goldman Sachs said in the note.
Mittal does not expect a material market share difference between the two best players. The company focuses on higher quality customers, and it has been able to consistently attract and retain mid-to-high end customers.
Telecommunications also believes that if spectrum prices remain at current levels, it may not participate in auctions in 2021.
However, by 2022, Bharti Airtel may need to buy a 5G spectrum and expects a 5G launch to start after 2-3 years at least in the major cities of India.
Mittal said there are currently not enough use cases for 5G and devices will have to be more widely available at lower prices for 5G to take place. The company doesn’t think 5G will lead to an increase in capex, as it will simply be replaced by a reduction in 4G capex.