Bharti Airtel steals march as exit from 4G handsets hits Reliance Jio

Reliance Jio’s target of having 500 million mobile customers is proving more elusive than it might have expected, stymied by Bharti Airtel’s success in adding more subscribers than Jio for two consecutive quar­ters and widening the lead between the two rivals. 

In Q3 of FY21, Bharti Airtel retained its number one position in terms of net subscriber additions by adding 14.2 million subscribers, nearly three times more than the 5.2 million added by Reliance Jio which found itself relegated to once again to second place. 

It was in Q2 FY21 that Bharti Airtel first leapt into the number one position when it notched up 13.9 million new subscribers as against Jio’s 6.9 milllion. For the first time in the past four years, ever since its 4G launch, Jio found itself pushed back into the second spot. The substantial slowing down of Jio’s net additions can be gauged from the fact that in the previous four quarters, it was adding 12 million net subscribers every quarter.

The company says the blip is a temporary phase caused by the disruption of the movement of migrant workers due to the pandemic, along with the farmers’ agitation which has seen  protestors targeting its food retail and related businesses in many places. But those in the know do not buy this argument because many of these problems are common to all telcos. 

The real reason for the slowdown, they say, is the near withdrawal from the market of Jio’s subsidised 4G feature phone offering which came bundled with data. Based on estimates, the shipments of the phone in October-Nove­mber fell to only 1 million. 

Priced at just under ~2,000, the phone was a cost-effective way to push the over 400 million 2G customers (a large chunk of whom were with Vodafone Idea which was losing market share) to upgrade to 4G. The strategy worked.  Jio garnered over 110 million or nearly a fourth of its customers through the feature phone offer. According to independent estimates, nearly 30-40 per cent of the incremental subscribers came from customers buying the feature phone offer. In its absence, the incremental subscriber addition has slowed down.  

Some months ago, Jio announced that it had tied up with Google to develop a low cost, Android-based 4G smartphone. The phone is expected to be subsidised, bundled with data, and cost under ~5,000. It is expected to power the big push the company needs to make to get new customers. 

But the launch has been delayed, perhaps until the end of the first quarter, and this interregnum has allowed Bharti Airtel to exploit the lack of a killer offer from Jio. 

Apart from this advantage, the latter has also played its cards well. This quarter, it has again seen a net increase in the high average revenue per user (ARPU) postpaid subscriber base of 0.7 million. This follows on from a similar trend last quarter.  

This upturn took place despite Reliance Jio deciding to aggressively enter this market by announcing new postpaid tariff plans bundled with OTT services. The offer failed to make a dent in the market. 

“The Reliance pos-paid tariff is not an aggressive pricing offer. They have, in fact, incr­eased the tariff but offered OTT bundled with it.  And remember, post-paid customers are stickier,” said a Bharti Airtel executive.  

Airtel also added 13 million 4G customers in this quarter which account for 90 per cent of the total industry 4G net additions. With 165 million customers, this segment acco­unts for 54 per cent of its total customer base and must be good for revenues as 4G customers have higher ARPUs. 

Moreover, with high data consumption of 16.8 GB per month per subscriber, analysts say that most subscribers used Bharti Airtel as the primary SIM. In short, Bharti’s persistent strategy to go for value added customers has worked.  

Analysts like Kotak Secu­rities point out that Bharti Airtel seems to have benefitted from two factors. One is the churn among Jio subscribers, many of whom will have their contracts ending in the coming months and are looking at upgrading to a smartphone. The other is the benefit to Bharti Airtel of Vodafone Idea continuing to lose subscribers, a process that continues unabated.

Deutsche Bank Research also points out that the incr­eased utility of broadband has helped users move up the curve to become premium users of Bharti Airtel with increases in postpaid net additions and 4G users going up by 34 per cent quarter-on-quarter. 

However, it adds that data use is up by 52 per cent year-on- year and 16 GB of data traffic per user per month and a $2.30 ARPU do not combine to generate strong cash flows from operations. To meet this challenge, researchers say Bharti Airtel will need to work out how to cost efficiently and add capacity.