Indian Telecom Sector’s ARPUs Will Rise As It Looks To Boost Customer Experience, Says Sanjay Kapoor

India has about 2 lakh 4G sites or signal hubs, according to Kapoor, former chief executive officer of Bharti Airtel Ltd. That compares with 20 lakh in China, he said, adding that the golden mean or ideal requirement for India is much higher.

That would require higher investments from an industry that saw its debt mount and profit tumble, driving many out of business, because of Reliance Jio Infocomm Ltd.’s cheap data onslaught. The Supreme Court’s order to pay thousands of crores of pending dues further threatened to cripple it. It prompted across-the-board tariff hikes, and a spike in data usage during Covid-19 lockdowns as millions logged in from homes provided more cushion.

Still, according to Kapoor, tariffs are not adequate. The 30-40% hike is not going to lead the industry anywhere and India has to go beyond an average revenue per user of $5-6 from the current $2, he said. “We are used to the ARPUs of the voice and SMS era. But you forget that even at that time, when you stacked up the ARPUs of a medium- and a high-end customer, they were much higher than the ARPUs that we have today.”

Every market needs to realise a price from the consumers, he said, adding that allows operators to make adequate money to invest in future technologies and customer experience.

Customer experience came into focus as millions of Indians logged in from home during the world’s strictest lockdown to contain the Covid-19 pandemic. That caused outages and speed problems.

Public pressure will push companies to reach the minimum level of service, Kapoor said. In other economies, regulators put pressure to up speed and improve quality and that will happen in India, he said. Still, wired services will have to grow and wireless carriers alone can’t provide that kind of quality, according to him. Indian homes, he said, will have to be serviced through a mix of wireless and wired technology.

Telecom Valuations

A clutch of investors including Facebook Inc picked stake in Jio Platforms Ltd., the holding company of Reliance group’s telecom and digital assets, in the last month and a half. Mukesh Ambani raised $10 billion at valuations that contribute about half the total market capitalisation of Reliance Industries Ltd.

Kapoor said Jio should be looked at its estimated enterprise -to-Ebidta ratio for 2020-21. Then the deals won’t look that expensive, he said.

The purpose behind these valuations is that a Facebook, for example, has a large ecosystem in India. “They are buying the story of non-accessible revenues that Jio would provide. WhatApp’s approvals, if they come in via a strong local partner, can help Facebook by kickstarting revenue streams like payments.”

Kapoor called India a WhatsApp country. “People wake up to a WhatsApp [message], sleep with a WhatsApp,” he said. “Facebook would want a Jio because they have a service to protect against the Chinese.”

Kapoor also considers Bharti Airtel as an attractive bet for investors. Any strategic investor will look for an asset-light balance sheet which is not leveraged, he said. If a company cannot spend on future technologies, then the investor will not be able to make long-term returns, he said.

Bharti Airtel has a balance sheet which is better placed, is narrowing its data delivery gap with Jio and is better placed for the long run, he said.

And while the Indian market could turn into a duopoly with Jio and Bharti Airtel as Vodafone Idea Ltd. struggles, Kapoor said the nation needs a third player.

“Even in the developed markets, with higher ARPUs, the third player struggles,” he said. For him, it’s in the interest of the country to make sure the third player survives for better customer experience.