Bharti Airtel: The making of a media giant

Is Bharti Airtel India's fourth-largest media company?

If estimates are right, then its revenues from selling music downloads, DTH services, IPTV and digital media outsourcing were upwards of Rs 2,900 crore (Rs 29 billion) in March 2010.

That is about 7 per cent of its Rs 41,829 crore (Rs 418.29 billion) revenues that year. This number puts India's largest telecom operator right at the top of the media big league.

The interesting part is not just the size of its media play, but the products and services that have taken Bharti Airtel to this position.

Unlike other media biggies, its fortunes come not from selling newspapers or broadcasting TV channels, but from redistributing music, selling television signals and being the back-end for a host of media companies.

While the company declined to give any numbers on its media businesses, it did share that 11.6 per cent of its gross revenues are non-voice. That is Rs 4,852 crore (Rs 48.52 billion).

. . . 

Of these, assume that 40 per cent are plain SMSes (in line with the industry average). Then the remaining Rs 2,900-odd crore comes largely from its media businesses, making it an integral part of the Rs 80,000-crore (Rs 800 billion) Indian media and entertainment industry.

"Over a period of time, the three screens -- mobile, PC and TV -- will converge and Bharti Airtel has to be in all of them," says Ajai Puri, director and CEO, Bharti Airtel digital TV services.

At 139 million subscribers, Bharti Airtel is the largest mobile operator in the country. That means it sells more ringtones, wallpapers, radio broadcasts and streaming videos.

Over 60 per cent, or Rs 1,700 crore (Rs 17 billion), of its media revenues come from mobile entertainment, clearly the rock star of the Bharti Airtel media pie.

"Telcos are a mix of Google and Facebook -- mass aggregators of consumer behaviour, with the additional dimension of location," says Shireesh Joshi, chief marketing officer, Bharti Airtel mobile services.

. . . 

That, he reckons, makes it best placed to sell mobile entertainment services in a segmented manner. By pre-loading say 5,000 songs for Rs 100-200, telcos such as Bharti Airtel offer an option that can then take on even pirated material. The margins, says Joshi, "are a by-product of scale".

Music forms roughly half the total mobile entertainment revenues. The rest comes from games, talk show, aartis, pravachans, et al.

Going forward, however, Joshi reckons that music will be large, but not as large as it is now. The recently concluded 3G auctions open up the possibility of more wireless bandwidth, some of which will push high-value products like video onto the mobile. "3G will do to mobile video what fixed broadband did a few years ago to computer screens," predicts Joshi.

The second business, TV, has had a good start. At 2.5 million DTH subscribers in March 2010, the business would have a topline of about Rs 500 crore (Rs 5 billion). The base has already gone up to a claimed 3.5 million. DTH, says Puri, "is as exciting as mobile was ten years ago".

The real fun will start when individual operators hit 15-20 million subscribers. The total industry subscriber base currently is 20 million. On IPTV, things will start happening only when broadband takes off, he says.

. . . 

The third business, digital media solutions, seems least exciting. It is, however, the one where the upside is most promising. Think of Bharti Airtel as a service company that could do anything that involves the formatting, transmission, and storing of content for media and entertainment firms.

It just distributed Peepli Live digitally. It has deals with NDTV, Star, CNBC, UTV and Shemaroo, among others. In a cash-strapped business just recovering from the effects of a slowdown, the cost efficiencies that Bharti Airtel offers, theoretically, are tempting.

According to a company study across clients, outsourcing could shave 30 per cent off costs for large media companies, 40-50 per cent for medium-sized ones and as much as 70-80 per cent for small companies. 

There are very few attempts made at this kind of back-ending for media and entertainment. Reliance offers similar services. An earlier attempt by NDTV, along with Genpact, to do the same didn't quite take off.

While Bharti Airtel has some obvious advantages over NDTV -- scale and negotiating power -- these may not necessarily mean that it becomes the back-end of choice for the industry.