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Airtel steps up home pass expansion in wired broadband biz

The company is open to look at partnerships to expand home presence

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MUMBAI: Airtel is taking the bull by its horns. Not wanting to lose out to the latest broadband entrant – Reliance Jio – it has stepped up fibre-to-home passes expansion. While announcing Q1 FY19 results, Airtel did mention that there would be significant step-up of home broadband investment, it has now rolled out almost one million (10 lakh) home passes in the first half of this FY.

Bharti Airtel MD and CEO India Gopal Vittal said in an earnings call that it is now beginning to see some growth in net additions. “This quarter has been a little bit better than the prior quarter though we saw some ARPU dilution because of the pricing arbitrage that there is and the adjustment as a consequence that we have had to do on the broadband front,” he also added. The ardent urge to have a significant foothold in this market is clear as in the last couple of years it has been rolling out about five to six lakh home passes.

Recently, Mukesh Ambani-led Reliance Jio acquired significant stakes in two large cable operators Hathway and Den Networks. The addressable market for the operator has increased highly leading to a more critical situation for other players. However, Airtel will continue to rollout home-passes aggressively in the second half of the FY to face the tough challenge thrown by its rival. While Airtel has been stepping up its investment in the segment already, it will do the same in the following year too. Notably, Vittal also mentioned the company would be open to look at partnerships to expand home presence through other entities that may have access to the last mile.

Vittal also added as it is adding a large number of home passes, the company should be stepping up acquisitions also which has already started in Q2. However, he also mentioned the gestation for translating a home pass into a utilised home pass is typically anywhere between three to four years. “It depends on when you got in there, the rate at which the occupancy is moving in a high-rise, which is really where our strategy is focused, on high-rise more than flatbed. So it depends on the occupancy, it depends on when the building gets ready and so on. So on a blended basis, if you look at the utilisations, they should come back to the levels that you normally have on the base over a three-year period,” he explained.

In its core business, Airtel has made about 7.5 million 4G net additions this quarter, a little lower than the first quarter. The company is adding most of its customers from the top 1000 towns. Though its performance has been poor in rural areas, Vittal is optimistic that it will begin to shift with the network rollout. “If you look at our 4G footprint, that is getting to about 150,000 sites. We added about 25,000 sites in this quarter and as we roll networks out we find that our share of 4G net adds in those particular geographies takes a bump up. There is a direct correlation between the rollouts of our network and the performance in 4G, which is why for example, in markets like Karnataka where we have rolled out much in advance we are getting more than our fair share of 4G net adds,” he said. The company stands at around 21 per cent odd on the EBITDA margins for mobile businesses.

Every new home the company is passing in the home broadband segment is fibre and the company’s existing digital subscriber line asset has also been upgraded through the vector fiber which was introduced a year ago. India’s fixed line broadband penetration was expected to increase to 10.3 per cent from the present single-digit share by year 2022 as per Singapore-based Media Partners Asia figure. Hence, although Jio could disrupt the market like it did in telecom segment, there are plenty of opportunities for other players too.

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