How Bharti Airtel is thinking out of the box

How to handle a juggernaut

When Reliance Jio launched its telecom operations in 2016, Sunil Bharti Mittal was the first to acknowledge that this would be their toughest phase. This was followed by a slew of events. Most of the private telecom players, other than Bharti Airtel, had to either sell out or merge to become larger. Jio entered the market with the benefit of learning from the mistakes of others. Needless to say, they almost had an endless war chest and an insatiable appetite for change and growth. While the loss of market share was inevitable, the challenge for Bharti Airtel was; how to handle such a juggernaut in the medium to long term. The answer was to think out of the box.

Time to focus more on Rural India

You can call it the Airtel Hinterland strategy, but that was the decision taken a few years ago. That has started to deliver results for Bharti now. Even as Jio continues to lead in terms of subscribers and market share, Bharti Airtel is rapidly closing the gap, thanks to its focus on rural areas. In India, there are Metro Circles like Mumbai, Delhi, and Kolkata. Then there are A-Circles like Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat, and the rest of Maharashtra. The B-Circles include West Bengal, Haryana, Kerala, Punjab, Madhya Pradesh, Rajasthan, and Uttar Pradesh. Finally, the C-Circles include areas like Assam, Bihar, Himachal Pradesh, J&K, and Odisha. In FY23, as part of the conscious strategy, Bharti Airtel gained market share in 13 out of the 14 B and C circles; compared to just 3 circles where Jio gained market share.

Does the B and C market offer enough for Airtel?

Let us first gets a heads-up on the size of the B and C circle market that we are talking about. Out of the total annual revenues of Rs71,825 crore for Bharti Airtel in FY23, nearly 51% of its revenues came from the B and C Circles. Clearly, these circles are not only large but also have immense growth potential and are driving most of the growth for Bharti Airtel. Of course, in most of the B and C circles, Jio is still the largest player due to its image of being an affordable service provider. But the focused and aggressive marketing strategy of Bharti Airtel in B and C circles is winning hearts and market share. In fact, at a more granular level, Bharti Airtel has already identified 40,000 out of the 60,000 villages in these circles to tap to expand markets. For Bharti Airtel, it will be the B and C circles that will drive market share gains in future.

Where are market share gains coming from?

For Jio, the market share gains are coming predominantly from the A and B circles while for Bharti Airtel, the alpha is coming from B and C circles. Even the network expansion plan of Bharti Airtel is calibrated to reflect its rural focus in the coming years. One experience for Bharti Airtel has been that these rural markets are less fastidious about pricing. As a result, the revenue growth of Bharti Airtel in FY23 was driven by ARPU growth while for Jio it was all about subscriber growth. The rural thrust has also helped market share. While Jio market share was stable at around 41% in FY23, Bharti improved its market share in the year from 35% to 36.2%.

Focus on the not so obvious terrain

For Bharti Airtel, the focus has been on the not-so-obvious terrain or rural markets. In FY23, the total telecom revenues basket was Rs2.20 trillion and grew at 14%. While the growth is good enough, it is not just enough to pull market share from the competition. It is essential to discover new markets, offers a unique proposition and hold on to them. For that, Bharti is really thinking out of the box. The rural thrust is surely helping them a great deal!

Content Source: Financial Express