Airtel to lead in 5G ARPU and subscriber additions vs Jio: UBS

UBS estimates indicate that 5G ARPU in fiscal 2023 will be Rs 400 for Bharti Airtel as compared with Rs 360 for Reliance Jio and Rs 400 for Vodafone Idea (Vi).
5G ARPU estimate in India
UBS also estimates that 5G subscribers in fiscal 2023 will be 15 million for Bharti Airtel as compared with 13 million for Reliance Jio and 2 million for Vodafone Idea (Vi).

The estimate shows that Reliance Jio will be overtaking Bharti Airtel and Vi in fiscal 2024 and later.

Jio and Airtel, the #1 and #2 telecom operators in India, have adopted divergent 5G network strategies. Reliance Jio is opting for pan-India SA rollout leveraging its 700MHz footprint. Airtel plans to take a more evolutionary approach with NSA initially.

Given the global experience on 5G adoption and the fact that killer-apps are lacking for 5G, Jio’s strategy of going for a completely new 5G SA (Stand Alone) network will likely have limited advantage in next 12-24 months.

Over the long-term, and depending on how enterprise use cases for 5G evolve, Jio’s SA network could offer an advantage, although Airtel (like most other telcos globally) will also migrate from NSA to SA and Airtel has the option to acquire 700MHz spectrum in the future if it turns out to be a game-changer for Jio.

“Looking at global examples, we do not expect these divergent strategies to lead to material change in competitive dynamics in the next 1-2 years,” UBS analysts Navin Killa, Amit Rustagi and Aditya Chandrasekar said in a research note.

While SA networks provide full 5G experience, they lack backward compatibility with 4G which could impact voice quality. While SA features such as network slicing, edge computing etc. cannot be fully offered in NSA, use cases for these are limited even in mature markets such as US and China.

Lack of killer use cases, higher upfront capex and low device penetration currently prevent SA 5G from delivering superior performance. Globally, OpenSignal data shows that consumer experience between the two networks is not markedly different. Also, there is no discernible shift in market shares due to network differential.

Total Capex for NSA and SA is not materially different though the need for a new core could mean higher upfront Capex for SA vs NSA. Jio has indicated $25 billion total 5G Capex. This includes $11 billion on spectrum and an estimated $6-8 billion on FWA CPE, leaving network Capex at $8-9 billion and not too different vs Airtel’s total three year Capex budget of $8-9 billion as well.