When Reliance Jio Infocomm Ltd reported results late last month, the massive tariff hikes taken by telcos in December was almost invisible. One concern that rose among investors was whether segmented offers were offsetting some of the gains from tariff hikes. But there is no such trend visible in Bharti Airtel Ltd’s March quarter results.
Average revenue per user or ARPU has expanded by as much as 14% last quarter to Rs. 154, compared to mere 1.7% growth at Reliance Jio. The company’s India wireless business grew by 16% sequentially as a result.
Since Reliance Jo’s revenues grew only 6% sequentially last quarter, this implies massive market share gains for Airtel. “Bharti Airtel’s strong data subscriber additions despite sharp tariff hikes reflects consumer acceptance of higher tariffs. Moreover, its ability to add data subscribers should also support market share gains,” analysts at Jefferies India Pvt. Ltd said in a note to clients.
It’s little wonder that the Airtel stock rose as much as 11% on Tuesday, adding $4.4 billion to its market cap in the process. Of course, it’s likely that tariff hikes may be reflected in Jio’s results with a lag, and it may plough back some of the market share losses witnessed in Q4.
Analysts at Kotak Institutional Equities say the ARPU increase speaks of Bharti’s ability to command a price premium in the market, given that competition in the mid/high-end subscriber base has now moved to network quality. Airtel’s ARPU is now 18% higher than that of Jio; two quarters ago, i.e. before the tariff hikes, the two companies were on par.
While Airtel’s total subscriber base was flat in the March quarter, the better yielding 4G data subscriber base grew by 7.3%. 4G subscribers now account for 52% of Airtel’s data base. According to analysts at Motilal Oswal Financial Services Ltd, Airtel garnered more than 40% of the estimated incremental market share in 4G subscribers last quarter. In Jio’s case, a higher share of JioPhone subscribers in the mix is leading to some pressure on ARPU as well as per subscriber data consumption.
The strong ARPU growth at Airtel also addresses concerns about demand elasticity, at least at current price points.
The net result of all this is a 27% sequential jump in operating earnings at the India wireless business. In fact, Airtel’s India wireless unit reported a positive earnings before interest and tax, compared to losses of about Rs1200 crore two quarters ago.
On the back of the strong Q4 numbers, analysts are upgrading earnings estimates. “Bharti’s top-notch execution places it well to capitalize on what should be a good 2-3 year phase of price increases in the sector,” say analysts at Kotak. What’s more, the company’s home broadband segment is also well placed for growth, thanks to the increased adoption of work-from-home at many companies.