India's Airtel looks to deepen enterprise focus as 5G spectrum auction looms

The new enterprise focus of Bharti Airtel is clear if one goes through the press releases issued by the company, India's second-largest service provider, over the last few months.

Among several initiatives, Airtel has launched a #5Gforbusiness campaign to test 5G use cases for different business verticals. Further, it has collaborated with Capgemini to develop India-specific enterprise 5G use cases. In fact, two 5G use cases, of smart health and immersive remote assistance for field operations, have already been deployed by Capgemini at Airtel's 5G Lab in Manesar in North India. 

Airtel recently announced the testing of Tata Consultancy Services (TCS) neural manufacturing solutions suite on Airtel's 5G network. TCS tested two use cases of remote manufacturing using robotics and vision-based quality inspection. Further, Bharti Airtel has extended its partnership with Oracle and will now jointly market Oracle Cloud Solutions to enterprise customers in the private and public sectors.

Airtel has also recently launched, Airtel India Startup Innovation Challenge to work with startups to develop solutions in 5G, cloud, internet of things (IoT) and digital entertainment. Last year, Airtel Business also released its first Business Insights report. 

All these developments point to the growing importance of the enterprise segment for the company. 

Why is Airtel focusing on the enterprise segment?

There are several reasons for Airtel's new-found focus on the enterprise segment, which it houses under the Airtel Business brand. Since the pandemic, there has been an acceleration in the digital transformation of businesses. This is particularly true for small and medium enterprises (SMEs), which has led to overall growth in the market size of this segment.

The second reason for this is 5G. While the consumer use cases for 5G are questionable, the new standard offers some path-breaking use cases for businesses. As the country moves closer to the 5G spectrum auction in 2022, Bharti Airtel is sharpening its emphasis on the enterprise segment.

RELATED: Indian telecom in 2022 faces 5G auctions, satellite competition

Apart from this, the enterprise segment is emerging as a new fighting ground in the rivalry between Airtel and Reliance Jio. Being an incumbent, Airtel already enjoys some advantage in this segment, but clearly, it needs to develop new innovative 5G use cases to continue to be in a leading position. While Jio has in the past spoken about its focus on micro businesses and SMEs, Airtel is largely looking at large corporations and the SME segment.

Airtel claims to serve more than one million enterprise customers, including large corporations, startups, small and medium enterprises and governments.

Another reason for Airtel's interest is that the enterprise sector comes with some inherent advantages. Typically, the earnings and profit margins are higher in the enterprise segment, and the contracts are for a longer duration leading to lower churn. Further, the Indian enterprise sector is now maturing and demands cutting-edge technology solutions, which is an opportunity for the telcos for better earnings.

As per ICICI Securities, Airtel Business is the most profitable business for Bharti and contributed 14% of consolidated revenue and 12% of EBITDA in fiscal year 2021. In the past two years, Airtel Business' market share has grown by 800 basis points to 31%, so one can say that while the mobile business suffered because of growing competitive intensity, this was not the case for the enterprise segment.

"We remain excited on enterprise business within telecom due to rising investment by enterprises into new-age solutions driving the higher total addressable market," states the ICICI Securities report. "Telcos have done reasonable investments in digital solutions for enterprise business (unlike B2C which are captured largely by startups or technology companies), and 5G may drive higher growth for connected devices which should augur well for telcos. Further, we like Bharti's strategy to enter new services such as cloud communications security and cloud, which should help the company grow faster in the next decade." 

In the enterprise segment, Airtel will face stiff competition from Jio, and Tata Teleservices, which has recently relaunched as Tata TeleBusiness Services.