With no tariff hikes in sight, telcos' market share consolidation continues
Summary
- Jio and Airtel have led the net additions in subscribers in June, growing by 3% and 6% year-on-year, respectively
Telecom companies need tariff hikes to boost growth, but the stiff competition in the industry is likely delaying the move. Analysts expect the price increases to come through after FY24.
Until then, the consolidation in the industry in terms of market share gains is expected to continue. Here, Bharti Airtel Ltd and Reliance Jio are the key beneficiaries. Vodafone Idea Ltd’s struggles to raise capital to fund its growth augurs well for other companies, especially in terms of subscriber addition. In this backdrop, Bharti and Jio would reap the benefits.
Note the data from the Telecom Regulatory Authority of India (Trai) for June. Jio and Bharti have led the net additions in subscribers in the industry, growing by 3% and 6% year-on-year, respectively. On the other hand, Vodafone Idea continues to lose subscribers, clocking 11% year-on-year lower subscriber additions in June. The multiple initiatives undertaken by both Airtel and Jio to attract new customers and retain existing ones could have helped here.
One is the capital expenditure on the deployment of 5G services. While Bharti is relatively selective in terms of regions for deploying 5G, Jio is aggressive. Also, Jio has introduced new plans to expand its broadband customer base, such as the ‘Broadband back-up’ plan. It also introduced multiple plans to strengthen its postpaid customers, as these customers are stickier in nature than prepaid.
On the other hand, Bharti, in the last few quarters, has taken price increases in its lower end of the plans, though the management clarified that the benefit of the tariff was small. According to Jefferies India report, “A pickup in Vodafone Idea’s active subscriber loss suggests continued market share shifts towards Bharti/Jio, which could further accelerate as 5G become more mainstream and Jio Bharat launch, turning the market into an effective duopoly sooner."
The June quarter (Q1FY24), data from Trai in terms of adjusted gross revenue (AGR) also indicated the same. As per Motilal Oswal Financial Services report, Airtel’s share, based on AGR, rose 62 basis points sequentially to 36.8% in Q1, while Jio’s remained steady at 41.2%. “Bharti’s growth is largely driven by an improvement in ARPU, while RJio’s growth is led by steady subscriber growth," added the report dated 24 August. On the other hand, Vodafone Idea’s market share fell 27 basis points sequentially to 16.1%. AGR is generally the profits of telecom companies from providing telecommunications and non-telecom services.
For now, the industry can take comfort from the minor improvements in Arpu or average revenue per user. Trai data shows the overall Arpu grew 2.3% sequentially, mainly on account of an enhanced subscriber mix and a focus on the premiumization of services (from 2G to 4G). In Q1, the three above-mentioned telcos saw a sequential improvement in their respective revenue per users.
