Why Airtel Leads In Its Race Against Jio

There was a time when India’s telecom industry had a vibrant spectrum. One could choose between at least 6-7 telecom operators. Things took a hit when Jio was launched in India. India’s telecom industry was now reduced to only three private players. They are Jio, Airtel, and VI(Vodafone Idea). Airtel and Vodafone-Idea are currently burdened by debt(Read More On AGR Dues). Now the race is mainly limited to Airtel and Jio.

Airtel and Jio currently lead the market in terms of subscriber base. Bharti Airtel, despite being financially weak, has been giving a stiff competition to Mukesh Ambani-owned Jio Infocomm. That makes some spectators ask, what makes Airtel so special? Can Airtel lead in the race against Jio? In this piece, we explore the factors that have made Airtel more viable in recent months and what lies beyond it. 

Airtel Q4 FY 2020-21 Result Highlights

• Bharti Airtel published its quarterly results for Q4FY21 on Monday, May 17, 2020. The results, although fairly good, were below analysts’ expectations. The share price of Airtel was down 2.25% by end of the day. 

• Bharti Airtel’s revenue stood at Rs 18,338 crore, up by 17.5% as compared to last year, but down by 2.9% as compared to last quarter. 

• The net profit for the quarter was Rs 759 crore, as compared to a loss of Rs 5,237 crore in the same quarter last year. 

• The company’s Average Revenue Per User(ARPU) fell to Rs 145 from Rs 166 over the past year. The company grew its 4G customer base by 4.3 crores(~31%) over the year. The 4G customer base grew by 8.3% QoQ. 

• The company’s mobile business revenue grew by ~19%. Its broadband revenue(Airtel Home Services) grew by~ 27% YoY adding 2.74 lakh subscribers in the segment this quarter.

• Geographically speaking, Airtel’s majority revenue comes from two countries, India and Africa. Airtel Africa’s revenue grew by 21.7% YoY in Q4FY21.

Airtel Vs. Jio: A Tough Run?

Airtel has managed to stand strong on its feet despite strong competition from Jio. There are reasons to believe that Airtel might come up stronger. There are some factors to consider though.

Subscriber Base

As of March 2021, Jio leads the market with a total of 41 crore subscribers, whereas Airtel has 34.4 crore subscribers. 

However, it should be noted that not all of Jio's subscribers are actively using its services. According to TRAI, the ACTIVE subscriber rate of Jio was just 78.15%. For Airtel, 97.47% of its subscribers were active on their network, beating Jio by a staggering ~20%.

In January 2021, Airtel added 3 times MORE subscribers than Jio. Airtel added close to ~6 crore subscribers in January, whereas Jio added only ~2 crore subscribers beating Jio for six straight months. However, Jio managed to get back at its game in February adding 6 lakh more subscribers than Airtel. The second COVID wave can severely impact Airtel's subscriber count.

Broadband Business

According to TRAI data, Jio is leading the broadband business in India having ~41 crore subscribers versus Airtel which has ~17 crore subscribers.

However, Airtel's broadband game should not be undermined. With its flagship product Airtel Xtream, Airtel was clocking in 10,000-20,000 subscribers per month which has now increased to 90,000 subscribers a month. Airtel has onboarded many small-time cable operators adding more than 72 cities to its list in the first 3-4 months of 2021. It offers bundled packages where one can avail of internet services, TV channels, and OTT platforms all in one. It has also been catering Work-From-Home packages of individuals and corporates. 

Non-Telecom Business

Jio earns only 6% of its income from non-mobile businesses. Airtel on the other side earns close to ~21% of its revenue from non-mobile businesses. This serves as a relative advantage to Airtel since a deface on the telecom business won’t affect the other side. Airtel’s non-telecom businesses include Airtel Xtream, Airtel DTH, Airtel Payments Bank, etc.  

Airtel Africa

During the COVID-19 lockdown period, while Airtel India lost close to 80 lakh subscribers in the first quarter of this year, Airtel Africa GAINED close to 1 crore subscribers. Airtel Africa contributed to 30% of Bharti Airtel’s consolidated revenue and has been increasing consistently over the past few years. In November 2020, we at marketfeed did a piece on Airtel Africa’s business model and everything that it was doing right. You can check out the article over here.

5G

Jio has already announced that it is planning to launch 5G in India. Airtel had announced last year that it had already tested its 5G network at an industrial area in Hyderabad. Nevertheless, Jio is running for the money when it comes to 5G networks. This is because it is not ‘burdened’ by the impediments arising from the existence of 2G or 3G cellular networks, unlike Airtel. To be specific, there are some fixed costs associated with owning  2G and 3G cellular towers, with a shrinking user base for these services. Owning 2G and 3G spectrum might not turn out to be cost-effective for Airtel. Moreover, Jio has actively been working on acquiring or partnering with companies involved in taking the 5G project ahead.

What Lies Ahead?

Airtel's ARPU fell sharply from Rs 166 to Rs 145. Besides, Reliance Jio's ARPU fell from Rs 151 to Rs 138 this quarter. What was the reason for this fall? The fall in ARPU was due to scrapping of the Interconnect Usage Charge(IUC) by TRAI. IUC was paid by one carrier to another whenever its customers made voice calls to a phone number in the rival network. The more a carrier receives calls from another carrier, the more money it would make by IUC. Jio was a net receiver of IUC, while Vodafone was a net giver. Airtel was somewhere in between. Yet, the scrappage of IUC did impact Airtel considering that it was the second-largest telecom operator in the country. Jio was affected a little more. 

What is worth noting is that Airtel has managed to grow in business given the unfavorable circumstances in the telecom sector. There is definitely some good work going on in its management and strategy side. Airtel has announced a set of free recharge packages for its low-income consumers benefiting more than 5.5 crore users amidst the ongoing COVID-19 second wave. While Airtel continues to expand its footprint, and with the 5G spectrum around, it would be worth noting how Airtel performs throughout the COVID-19 second wave and how it plans to compete in the 5G regime.