Bharti to bundle handsets with connections

In a major shift in strategy, India’s largest mobile operator Bharti Airtel is set to bundle handsets with mobile connections. This means that the company will provide a handset with a new connection at partly subsidised rates.

Bharti’s move follows the recent announcement by its main competitor in the GSM space — Vodafone Essar — which said it will launch a series of ultra low-cost bundled handsets to get a bigger pie of the rural Indian market and increase its market share.

While CDMA players such as Reliance Communications (RCOM) and Tata Teleservices have adopted an aggressive handset driven expansion strategy to drive up their subscriber base, this marks the first time that a GSM player is venturing into this space on a pan-India level.

“We are currently in talks with many mobile phone manufacturers for tailor-made handsets that are specific to our requirements,” Bharti Airtel president (mobile services) Sanjay Kapoor.

“Going forward, handset bundling will be an integral part of our strategy. We are in talks with global players, but not the big three — Nokia, Motorola and Sony Ericsson. The announcements will be made after the deals are finalised,” Mr Kapoor said. He also dismissed the argument that Bharti’s foray into the bundled space was driven by its desire to counter Vodafone’s entry into India with ultra-cheap handsets.

Bharti’s move will further intensify the ongoing price war in the handset market. The price war was kicked off by RCOM, which during the last two months has launched a series of handsets priced at Rs 777 and upwards.

This resulted in RCOM’s counterpart in the CDMA space Tata Teleservices launching sub Rs 1,000 handsets bundled with its mobile connection and market leader Nokia choosing India for the global launch for its latest low-cost phones. In fact, RCOM sold over a million handsets within the first week of its launch of its low-cost models.

According to Mr Kapoor, Bharti would not compete on the price factor: “Our experience has shown that cheapest handset is not the key to growth. Rural India wants feature rich phones with very good after sales support. Our bundled handsets will be priced at sub Rs 2,500. We are not in the game of offering discounts and subsidies on the handsets, which is the industry trend,” he said

While handset bundling by GSM operators is a popular concept in Europe and other developed countries, operator-branded phones represent less than 2% of GSM connections in India. Traditionally, GSM operators in India have shied away from this space as handset vendors such as Nokia, Motorola, Samsung and LG have been extremely aggressive with their sales strategies.

However, industry analysts estimate that this ratio will rise to about 15% by 2012 following Vodafone’s entry into India, as this will force other operators to offer similar deals.

According to Bharti executives, the company is currently in talks with lesser known handset brands for the bundled offerings. They also added that concrete service arrangements will be put in place prior to the launch. Currently, Bharti offers bundled connections with all major brands such as Nokia, Motorola and Samsung. However, these are on a limited scale and very specific to certain circles and cities.

Industry watchers see bundling as future for operators’ expanding to rural India, especially, considering that the tele-denisty here is under 2%. Selling its own branded phones will therefore be part of Bharti’s strategy to further strengthen its position. Bharti has a market share of 31.20% in the GSM space and 40.7 million subscribers as of May end.