Bharti Airtel eyes large market share with $2.5 billion investment in 2017-18

Despite a dramatic drop in quarterly profit, India's largest telecom company Bharti Airtel Ltd hopes to retain its leading position the Indian market with the firm planning to invest $2.5 billion in 2017-18.

The company has said that the money would go to building the 4G capacity in the country, while an additional $500 million would be invested in Airtel's businesses in Africa.

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In an investor call on Wednesday, a top executive at the firm suggested that Airtel's  average revenue per user (ARPU) could go down in the short term but the company's strategy would be to aim for a larger market share in the long run.

"In the short-term, we are seeing ARPU compression. In a world of data, what happens is, when a customer gets habituated to data, then moving pricing at a time when there is equilibrium in the market will actually lead to all of that pricing coming back in the form of revenue," the Livemint quoted Gopal Vittal, the chief executive of Bharti Airtel, as saying.

Also read: Reliance Jio effect: Airtel Q4 net profit tanks 72% to Rs 373.4 crore

Vittal added: "So, in the short term, one of the major metrics that we are tracking is... we are going relentlessly after market share".

The entry of Mukesh Ambani-led Reliance Jio has triggered an unprecedented competition in the telecom sector in India. Airtel reported a 72 per cent decline in net profit for the March quarter. The third-largest operator Idea Cellular is slated to announce its results on May 13. Vodafone, the country's second largest operator, is not listed in India but is expected to share its financials later this month.

But in in the third quarter of 2016/17, Idea reported a loss of Rs 383 crore, its first-ever quarterly loss since listing, while Vodafone, which has hardly registered a net profit since its entry into India, recently took a five-billion-euro write-off on account of its India business.

Industry players do not expect things to change for the better anytime soon. Till about last year, the lowest call tariff was 45 paise per minute (data at four paise per 10 kilobyte), a sharp drop from Rs 6-8 per minute in 2002. Now, Jio is charging nothing for voice calls and nearly 1 paisa per megabyte for data. This has forced other players to reduce tariffs to keep their subscriber base intact.

In the process, the average realisation per minute has fallen. Ratings agency India Ratings says voice realisation is expected to drop to 25-28 paise per minute in 2017/18 from 30-35 paise at present. "A 20-30 per cent decline in data tariffs will pull down the average revenue per user despite higher volumes from data usage," it said.