Winning the Data Proposition

*This case has been designed for iCreate 2015 and is for illustrative purposes only

Airtel is a leading Telecommunication service provider in India. It has the third largest subscriber
base across the world and operates in 2 continents (apart from Channel Islands). It was awarded the No.
1 Telecom service provider for 2014-15. Vodafone and Idea are two other service providers with high
customer market share. The market shares are in figure 1.

Figure 1 Customer Market Share

Airtels emphasis on network quality and its first mover advantage helped it to enjoy market leadership
in voice. It is the only service provider in India which offers 2G, 3G and 4G services (sole provider of 4G
services currently). The company has 4G licenses in 70% of circles.

Although voice margins drive revenue of the company currently, data revenue is expected to be the
singular growth driver in the near future. To illustrate the point, in the last financial year, voice and data
revenue grew by 5% and 60% respectively. Although the companys data growth has been exponentially
growing, its leadership in customer market share did not help in making it the chosen data service
provider.

In the new financial year, the companys data strategy will define its market share and leadership position
that it holds today. Prakash Subramanyam, the new CMO of Airtel has been charged with making Airtels
data proposition and Go-to-market plan. During his meeting with the data and devices team, he realized
that a comprehensive data strategy for Airtel has distinct challenges in the areas of:

1. Service Offering
2. OEM and OTT Offering

Service Offering:
Prakash is convinced that with the addition of 4G in the offering list, Airtels positioning and its
data offering needs to radically change. Learning from countries that pioneered 4G technology, it was
evident that with the right combination of device penetration and service offering, there can be an
exponential increase in adoption in a short span of time.
Figure 2: Data usage growth HSPA vs 4G

Prakash needs to address the following points on service offerings in order to develop a data strategy:

1. What are customer expectations on data? Accordingly, how should the brand position change?
How should market communication change to attract data users?
2. What should be the product/ service offerings in 2G, 3G and 4G?
3. What should be the pricing strategy?
4. How can Airtel use its superior network and distribution for market penetration?

OEM and OTT Offering

Current Device ecosystem and the OTT platforms in India:

Mobile phones used to be communication devices, however, smartphones are now becoming a
way of life. Apart from communicating, people use it for social networking and sharing, entertainment,
infotainment, shopping etc. To cite an example, today 70% of Facebook users access it on smartphones.
All these activities on smartphones consume data thus creating a strong business scope for the Telecom
industry.
About 18 - 19 million smartphone devices are shipped to India every quarter. Although this number
remained consistent for the last 6 quarters, the percentage of 4G devices has increased from 3.5 million
to 6 million between last quarter and current quarter; there were only 5 models of 4G phones shipped to
India, this year the number is 70. Currently, 4G devices constitute less than 4% of the smartphone base,
but the penetration is expected to grow at a CAGR of more than 30%. 4G as a technology gives 10 times
better experience on mobile internet than 3G technology and Airtel has the first mover advantage.
Prakash knows that it is important to develop the ecosystem before other players in order to gain market
share.
The question is whether to
1. bundle devices with 4G services
2. sell own branded phones (either manufacture or tie-up with OEMs)

There is also the imminent launch of a new service provider, Reliance Jio, who became the fourth largest
player (customer base) in India through partnership. Reliance Jio has 4G license in all 22 circles. It is
expected to disrupt market conditions by offering deep discounts. According to the buzz in the market,

Reliance Jio is expected to launch 4G services for half or less than the current service costs. This service
provider may launch services with device bundling as low as INR 4000. Going after the market through
discounted model like Reliance Jio will put any companys profitability on pressure. Vodafone is expected
to launch 4G services by the end of the year. Idea is expected to launch mid of next year.

How should Airtel prepare itself for the impending launch of 4G services by Reliance Jio?

How can Airtel use its first movers advantage effectively to convert its technological leadership to
market leadership in 4G?

Consumer behavior has changed from calling and texting to all these plus a world of internet, accessed
through various OTT apps. OTT application is defined as any app or service that provides a product over
the Internet and bypasses traditional distribution. OTT has invaded four different fields
1. Mobile voice E.g. Skype
2. Messaging E.g. Whatsapp
3. Media E.g. hotstar
4. Cloud based service E.g. Dropbox

Global Telecom players have tried many different ways to counter OTT players. Some created integrated
plans like Vodafone UK, some offered cost effective plans to stop de-growth of usage like T-Mobile in the
US, some collaborated with OTT players like Sprint and Google Voice while others created their own OTT
applications like US service provider Verizon wireless product Go90.

How should Airtel respond to the OTT invasion in India?

How should Airtel prepare itself to battle in an unfamiliar industry with players who are more flexible
with their value proposition and business models?