How Airtel retained revenue share, but Aircel and Idea lost due to Jio

Airtel revenue market share in H1 fiscal 2018
CLSA analysts Deepti Chaturvedi and Akshat Agarwal say that Bharti Airtel is in a strong position in the Indian telecom market despite competition from Reliance Jio.

The CLSA report also indicates that Idea Cellular and Aircel lost revenue share in the first half of fiscal 2018, while both Airtel and Vodafone India maintained their revenue share in the highly competitive wireless market.

Reliance Jio, a company promoted by Mukesh Ambani, has 9 percent revenue share in India. BSNL / MTNL lost revenue share to 4 percent from 5 percent. Idea lost revenue share to 17 percent from 19 percent. Aircel lost revenue share to 4 percent from 6 percent.

Bharti Airtel added 22 million wireless subscribers and kept revenue market share at 33 percent in the first year of Jio’s operations.
Airtel revenue share in metrosAirtel achieved 100bp share gain in metro markets such as Kolkata, Mumbai, Delhi and Chennai, where Jio had the highest impact. The revenue growth underscores the strength of Bharti’s network and execution. Moreover, Airtel achieved 4x increase in data usage, showing the potential of the network driven strategy.

Airtel has 66 million data subscribers out of its total subscriber base of 282 million offering the opportunity to grow data revenue.

Airtel achieved 40 percent growth in network investments.

The report debates that the performance of Airtel was better than both Idea Cellular and Vodafone India. Airtel’s addition of 22 million subscribers was the highest among incumbents and over 2x Idea Cellular and Vodafone India’s.

Bharti’s pan-India data network allowed the leader to be more nimble in responding to Jio’s tariffs resulting in lower churn. Airtel achieved 4x increase in data usage to over 4GB per month.
Bharti Airtel network investments in H1While Bharti lost data subscribers when Jio was free, since April-17, when Jio turned pay, Bharti has added over 8 million data subscribers and 14 million 3G/4G data subscribers.

47 percent of Airtel’s 66 million data subscribers are in urban areas, reflects immense opportunity to grow data revenue.

The main challenge for Airtel was to arrest 23 percent drop in ARPU to Rs 145. Data adoption will be key to boost ARPU of Airtel.

CLSA expects a 7 percent CAGR in Airtel’s ARPU over FY 2018-2021.

Pressures on Airtel’s mobile operations in India over the past year have driven a 12 percent drop in its consolidated revenue and 16 percent dip in EBITDA.

Despite this, Bharti has been relentless in its network investments and has upped Capex spend by 40 percent to INR 140 billion over 1HFY18.

While Reliance Jio’s discount reductions would be a near-term positive, the ~60 percent decrease in interconnect rate (IUC) in India and Jio’s 4G feature phone push will keep Airtel’s second half under pressure. Airtel should deliver a 16 percent CAGR in EBITDA and 9x increase in PAT after fiscal 2018.