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Airtel to launch 4G network to counter Reliance Jio

Apart from launching VoLTE service by March 2018, Airtel says will partner phone makers for 4G feature phones, less than a week after Reliance Jio unveiled the JioPhone.

business Updated: Jul 27, 2017 10:59 IST
Amrit Raj
Airtel CEO Gopal Vittal says do not want to react to JioPhone rightaway, but Airtel will intensify bundling and expects device makers to come up with feature phones, which have 2G, 3G, 4G and dual sim facilities.
Airtel CEO Gopal Vittal says do not want to react to JioPhone rightaway, but Airtel will intensify bundling and expects device makers to come up with feature phones, which have 2G, 3G, 4G and dual sim facilities.(HT Archive)

Bharti Airtel Ltd plans to take on Reliance Jio Infocomm Ltd by launching its own VoLTE (a 4G voice network) service by March 2018, and working with phone makers on new low-cost 4G feature phones, Gopal Vittal, chief executive and managing director of Airtel said during a call with analysts.

On Friday, Reliance Jio announced the August launch of the JioPhone, a 4G feature phone that the firm plans to make available to users, effectively for free.

Since then, analysts have said that rivals, such as Airtel, have no option but to partner with phone makers and do something similar.

On Tuesday, Airtel announced that its net profit declined to Rs367 crore for the three months ended 30 June from Rs1,462 crore in the year-ago period. The company’s third straight decline in quarterly profit was caused by Reliance Jio Infocomm Ltd, which has embarked on a price war since its launch last September.

Jio started charging customers in April, explaining Airtel’s better-than-expected performance in the June quarter (analysts polled by Bloomberg had predicted a Rs282 crore net profit), but Friday’s Jiophone announcement opened up a new front.

At the moment, Airtel does not want to react to JioPhone as it does not want to subsidize and manage inventory, Vittal said, but it will intensify bundling and expects device makers to come up with feature phones, which have 2G, 3G, 4G and dual sim facilities.

“ We have no intention to get into subsidising devices and running the inventory as if we own them. There is a difference between subsidizing and bundling. We have done that on the smartphone side for many years. We will continue to look at bundling,” Vittal said.

In the course of the call, Vittal mentioned that with 4G attracting more users and 2G still holding up, it is 3G telecom networks that will shut down first in India. Airtel has not taken a call on shutting its 3G network yet, Vittal clarified.

Despite the entry of high-speed 3G and 4G, 300 million Indian customers still use 2G networks, primarily to make voice calls. A top industry executive from a rival firm who spoke on condition of anonymity said 3G will “come a cropper” since 4G speeds will be higher than 3G.

2G price points are still so low and devices are simple to use, so they will remain in vogue until 4G devices come at that price point with the same impact, the executive added.

During the analyst call, Airtel executives also said the company will look to monetise the roughly 10% stake its wholly-owned subsidiary Nettle Infrastructure holds in its tower unit Bharti Infratel Ltd. The management did not offer a timeline for the process.

In March, Airtel sold a 10.3% stake in its tower unit to a consortium of investors to raise Rs6,193.9 crore, funds that India’s largest telecom operator plans to use to pare debt and counter competition.

In October, Airtel’s board authorized a committee to evaluate the sale of a significant portion of its Infratel stake. At a 15 March board meeting, the company decided that it would not sell a controlling stake for now, but transfer a 21.6% stake to Nettle Infrastructure, a wholly-owned subsidiary, which it could sell to a potential investor.

CNBC-TV18 on Tuesday reported Airtel was in early talks with Japan’s SoftBank for selling a minority stake in the firm through sale of new shares. The proceeds, it said, will be used to take on competition from the new entrant in as Airtel tries to maintain its number one position in the telecom space.

During the analyst call, the management called this “pure speculation”.