Bundled packs keep Airtel's Q2 ARPU stable, but AGR overhang on share price

Bharti Airtel posted better-than-expected operational numbers for the quarter ended September. While the full details of its results are not available, its per-user metrics, subscriber base, and churn have improved over the previous quarter. 

In a seasonally weak quarter, the telco reported average revenue per user (ARPU) of Rs 128, down 0.78 per cent on a sequential basis. However, adjusted for the merger with the consumer business of Tata Teleservices (lower ARPU subscribers), like-for-like ARPU has been flat at Rs 129. 

What has helped the operator report a stable ARPU is uptrading from lower-value packs to bundled ones and 4G services, which are of higher value. The Airtel Thanks rewards programme has helped the company upgrade and retain customers. The changes made to the minimum recharge plans have aided in keeping per-user revenues stable. 

Jio, in comparison, had reported a 1.7 per cent fall in ARPU to Rs 120, on account of a higher proportion of JioPhone users. 

On the subscriber front, while Reliance Jio added 24 million customers, additions for Airtel stood at just 2.6 million. 

However, adjusted for Tata Tele users and the shutdown in mobile telephony services in Jammu & Kashmir, the number of customers has not changed much. The company indicated that the churn level, which had been declining for the last few quarters (Q2 level at 2.1 per cent) was expected to trend down in the quarters ahead. Airtel’s 4G subscriber base crossed the 100 million-mark in the quarter, with additions of 8 million. 

To retain market share, the company will continue to focus on quality customers, reduce churn, and focus on content to improve customer stickiness. In addition, it is making investments to improve the quality of its network, refarming spectrum to 4G, and closing down 3G networks. 

While the operational improvement is positive (stock up over 2 per cent), the Street will await the outcome of the Supreme Court ruling on the firm, and the government’s plan to alleviate the financial stress on the telecom sector. With cash burn per quarter at manageable levels, capex intensity is expected to reduce. Further, with easing competitive intensity, things should look up for the operator. However, given the uncertainty on the aggregate gross revenue issue, investors should avoid the stock as of now.