Sri Lanka’s telecommunication industry is now at an interesting juncture. With two existing players merging their operations and the regulator removing the floor price on voice calls, the industry appears to be heading for exciting times. In this backdrop, Mirror Business spoke to Jinesh Hegde, CEO of Airtel Lanka, a unit of India’s Bharti Airtel, which entered the Sri Lankan market a decade ago, to find out Airtel Lanka’s future plans and his take on the current telecom landscape in the country.

By Indika Sakalasooriya
How has the landscape for telecommunication companies changed over the last decade, locally as well as globally? 
Well, in the last decade, many positive changes in favour of the telecom industry took place. There is a very clear move away from voice to data usage. Approximate data contribution is now at 40 percent for the industry. Data has now become the decisive factor in selecting a provider. On average, a consumer spends three hours a day browsing on their mobile. Social media and messaging platforms drive data consumption, with the likes of video sites such as YouTube being the data growth engine.

Sri Lanka is seeing one of the fastest penetrations of smartphones. It really kick started the changes in the market. The YoY smartphone growth is currently 50-60 percent. We also saw a growth in mobile broadband. The current penetration is approximately 30-35 percent and there is ample room to grow.

We also saw an expansion of OTT penetration as a result of Google, Facebook and so on. The current social user penetration is at 32 percent, indicating potential growth opportunity as well.

The Sri Lankan customers are open to experimenting and the phenomenon of multi-SIM, which began in the last decade and will continue in the years to come. As of 2019, we have a mobile subscription of 130 percent. 

Of course, as the last entrant, we saw a lot of opportunity in the dual SIM trend and we leveraged on that. It’s a key driver of business for us.

Overall, I would say last 10 years have been good for the telecom industry. In addition to expanding connectivity, operators also looked at leveraging on smartphone, content and mobile broadband. However, there is still headroom for growth.

Are you the biggest player in the Sri Lankan second SIM market?
Yes. We are the biggest player in the second SIM market. What we do is, we enter as the second SIM and over the years we tend to move to become the primary.

Will you be able to share with us your current subscriber base here?
What I can share with you at the moment is our Bharti Airtel group’s global subscriber base, which is 403 million, as of March 2019.

Is the Sri Lankan operation you are heading profitable?
I would say the growth we are experiencing is very promising and in the last three years specially, we have made significant strides. Even though I cannot talk about Sri Lankan numbers, I can share with you Bharti Airtel’s performance in the South Asian region, 
excluding India. 

For the FY18/19, the South Asian operations made revenue of Rs.10.7 billion and our customer base rose over 14 percent YoY to 2.6 million. Our year-to-date investments in the region top Rs.54.8 billion.

Airtel began operations in Sri Lanka with a bang 10 years ago. But it seemed that you lost your momentum midway …
Yes. As you may remember, the momentum during the launch in 2009 was huge. But the next few years we were comparatively slower. However, the last three to four years, we are back and our momentum is very good. 

With innovative products such as the recent ‘Katha Bus’ package, which revolutionised the country’s telecom landscape with unlimited voice calls for just Rs.98, we are very much back. Most importantly, we see a promising business momentum going forward.

What are the key similarities and differences between the Indian and Sri Lankan markets?
There are a lot of similarities between the two markets. However, of late, India has accelerated its investment in mobile broadband network. Also, we saw a bundling of low-end smartphones, bundling of content by leveraging on rich content. As a strategy, we too can adopt this in Sri Lanka and drive smartphone, social, content user and usage.

In terms of broadband penetration, India is currently at 55-60 percent and Sri Lanka is 30-35 percent. Interestingly, a few years ago, Sri Lanka was ahead of India. During the floor pricing regime, all operators were offering the same price and this impacted the rate of growth/mobile broadband penetration. It was not good for the industry, limiting its growth, competitiveness, which I think even led to the government limiting their digital agenda. 

However, with the relaxation of the floor price, all operators have brought in innovation. Post-floor price removal, mobile broadband and usage have increased and all operators 
are happy.

It’s obvious that data and mobile broadband are the future. What is Airtel Lanka’s strategy to capture a slice of that market?
Slowly but steadily we have worked hard in the last 10 years on our network and IT systems. As a result, today we are a preferred brand for the country’s youth. In fact, we have a very good share in the youth market because we offer a superior service. 

As you may know, we have been ranked as the fastest Internet provider by the Telecommunication Regulatory Commission and our partner Huawei. We are making continuous investment in the network, specially in the areas of building capacity to offer buffer-free technology through capacity enhancement, dual carrier, smart caching solutions.
In addition, we have entered into partnership with content providers with end-to-end pairing brining down latency. Our intention is irrespective of the hands to give consistence mobile broadband experience to consumers.

Our current base is 95 percent pre-paid and 5 percent post-paid and we cover 90 percent of population across the country.

But the lifting of the price floor—hasn’t it created some sort of price war in the market?
Well, it is a subjective question. However, since the removal of floor price, the industry revenue has been stable and that’s a good sign and penetration has grown. I believe that there is a lot of economic value, which can be obtained as a result of this move. 

The removal of the floor price also meant that the consumers could access the Internet more freely and affordably. This, in turn, will increase online economic activities such as online shopping, online banking and other economic activities, which are transacted over the Internet, which has a link towards a country’s GDP. It has now been revealed that 10 percent broadband penetration leads to a 0.8 percent 
GDP growth.

The race for 5G has begun. Even in Sri Lanka, the number one and two telcos are experimenting with the technology. What is Airtel Lanka’s approach to new technologies and innovations happening in the telecommunication space?
Well, our approach is, irrespective of the technology, we want to give a buffer-free experience to our users. We, as a group, are focusing on all the technological advancements happening in the telecommunication space and our lab in India is doing trials on such new technologies.

Our network operations are digitised to move from reactive to predictive to give an error-free experience to our customers. As I said, irrespective of device, profile or geography, what we try to do is to offer a consistent mobile experience to our customers.

But you are yet to even launch your 4G operations in Sri Lanka …

We are doing use-case trials in India and would be happy to launch when we are ready.

So what is next for Airtel Lanka?
We want to continue to upgrade our network, expanding on coverage and adding capacity. Recently we did an IT transformation and digitised our entire customer journey and networks. 
Internally, we are automating our approval process and using AI and Machine Learning to predict customer behaviour and promote offers for renewal, continuity and topping up of packages for pre-paid customers. 

In fact, smartphone usage is more advanced and they generate 20 percent higher revenue than an average customer. Similarly, social/content users generate 40 percent higher usage revenue.

What about growing your market share in Sri Lanka through acquisitions and mergers?
We believe there is still enough headroom in the Sri Lankan market for us. Mobile penetration and social penetration are still at low levels. As an MNC and the world’s third largest mobile operator, we have enough expertise to offer the Sri Lankan market great value. 

Our immediate plans include driving further penetration in our youth segment, investing on the network, both expanding coverage and augmenting capacity, digitising the customer journey to make it easy for the customer to engage with us, partnering with original content providers, distributors and aggregators of content and replicating our royalty programme AirtelThanks, which is a huge success in India.

What are the challenges and opportunities you see in the regulatory front?
Excessive taxation has become a big challenge for telcos. The recently introduced tower tax of Rs.200,000 per tower, voice tax of 37 percent and data tax of 19 percent place Sri Lanka among the countries that have the highest taxation on telcos in the 
sub-continent. 

In terms of opportunities, we believe adoption of number portability is one area, which could give the consumer the freedom and keeps the operators on their toes. Number portability will give the consumer a chance to freely choose the best quality proposition in the market without being restricted to a phone number. 

I also believe the termination rates another area to consider. These are the rates that different telecom providers charge one another for routing calls through their systems. The benefit of reducing these rates is directly beneficial to the consumer. This was introduced a decade ago and it needs to be revised now. 

Even though we pay 50 cents a minute as the termination charges, the actual cost is less than 3 to 4 cents. We are happy to see that the regulator has floated a White 
Paper aiming to slash the termination rates.

It seems that the consolidation in Sri Lanka’s teleco market is finally happening as Hutch and Etisalat merged their operations. Do you think further consolidation is required?
The telecom industry was congested with five players, given the size of the Sri Lankan market. In fact, consolidation was necessary for sustainability. At the moment, all four operators in the Sri Lankan market are backed by global operators. This is positive for the industry. 

Currently what we have focused on is to create an organisation that drives simplicity while investing on application and digitising the customer journey. We are relatively a young organisation and we follow an outsourcing and managed services model. We are geared for the opportunities Sri Lanka has 
to offer.