Connect with us

Daily News

Vodafone Idea Vs Reliance Jio — The Great Indian Telecom Battle

Three years ago, Reliance Jio entered the telecom sector with rock-bottom tariffs. Recently, Jio overtook rival Bharti Airtel to become the country’s second largest operator in terms of mobile phone subscribers

Not very long ago, India had a booming telecom industry, with a dozen operators battling for market share in this billion user market.

But three years ago,Reliance Jio entered the sector which rock-bottom tariffs. A brutal tariff war started, which kicked several operators out of the race to provide wireless services and left many with battle scars. Today, just two other private operators, Bharti Airtel and Vodafone Idea are left to compete with Jio.

Earlier this week, Jio overtook rival Bharti Airtel to become the country’s second largest operator in terms of mobile phone subscribers.

Vodafone Idea retains top spot in terms of subscriber base.

But if you compare India’s number one and number two players on metrics like profitability, revenue, 4G data users and the growth trend of the operators’ average revenue per user, the results that emerge boggle the mind.

For starters, Vodafone Idea, with the largest user base, made a net loss of Rs 4,874 crore in the June quarter, while Jio made a profit of Rs 891 crore. Both companies have priced mobile services at almost similar levels. To be sure, Vodafone Idea is in the midst of a merger integration exercise. The company believes that it is delivering on its stated strategy although the benefits are not yet visible in its topline. It also expects better financial performance going forward. But that depends on when tariffs improve in the market, and that call is clearly in Jio’s hands.

Take a second metric – revenue. Despite more subscribers, Vodafone Idea, which posted revenue of 11,269.9 crore, lags behind Jio which posted revenues of Rs 11,679 crore in the June quarter. Its other rival, Bharti Airtel, will announce its results on 1 August.

Third, Vodafone Idea had 84.8 million 4G subscribers as of 30 June. However, in comparison, Jio has 331.3 million 4G subscribers. Then again, Vodafone Idea’s subscriber base is a mix of 2G, 3G and 4G while Jio is a 4G-only operator.

The fourth metric is the most interesting. While Vodafone Idea’s average revenue per user is steadily climbing, Jio’s is dropping.

After Vodafone Idea rolled rout monthly minimum recharge plans for subscribers to stay on its network, its shrinking subscriber base has led to an improvement in average revenue per user (Arpu) to Rs 108 in the June quarter, from Rs 104 in the March quarter, Rs 89 in December and Rs 88 in September.

Average revenue per user is an operator’s total revenue divided by total subscriber base.

Jio, on the other hand, has shown the opposite trend for the last 6 quarters. Jio’s ARPU for the June 2019 quarter was at Rs 122, down from Rs 126.2 in the March 2019 quarter and Rs 130 in the December 2018 quarter. It was at its peak of Rs154 in the December 2017 quarter.

A declining ARPU means subscriber additions on the network outpace its growth in revenue. In other words, every incremental Jio user contributes less to the total revenue and for Vodafone Idea the quality of the user base is improving.

A clear picture of who wins this telecom war will emerge only when the dust settles in the battleground. Till then, customers can sit back and enjoy cheap data tariffs.―Money Control

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!