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Why Bharti Airtel didn’t hike tariffs when Vodafone Idea did

Bharti Airtel Ltd. hasn’t hiked tariffs even as peer Vodafone Idea Ltd. did so recently as the two companies battle to consolidate in India’s competitive wireless market that’s led by Reliance Jio Infocomm Ltd.

Vodafone Idea raised the prices of two of its post-paid family pack plans in the Uttar Pradesh circle by Rs 50 to Rs 649 and Rs 799, respectively.

But Bharti Airtel didn’t follow suit even as it had previously said that average revenues per user aren’t sustainable in the long term and said the tariffs need to go up. But it can afford to hold off.

“Even as Bharti Airtel isn’t leading tariff hikes, it had the best flow-through of December 2019 hikes,” CLSA said in a report. “Furthermore, Bharti Airtel is gaining subscribers and increasing revenue market share.”

The Indian telecom sector was one of the few sectors that remained shielded from the economic disruptions of the Covid-19 pandemic as people logged in from home, consuming more data. That was a relief after an October 2019 Supreme Court ruling asked them to pay thousands of crores in pending statutory levies. Liabilities of Bharti Airtel and Vodafone Idea jumped to above Rs 90,000 crore.

Yet, analysts expect Bharti Airtel to clear its dues because of its healthy cash flows. And Jefferies said in a report in November that the company’s key operating metrics bode well for further market share gains even with delayed tariff hikes.

India’s second-largest wireless provider is also awaiting the telecom regulator’s decision on floor tariffs as it will help them hike tariffs without fearing loss of subscribers.

The possibility of Reliance Jio not hiking tariffs could be another reason for Bharti Airtel keeping tariffs unchanged, according to Goldman Sachs. The brokerage said in a report last month that “based on our conversations with investors the general view is Jio will not raise prices”.

Here’s a closer look at why Bharti Airtel can afford to not hike tariffs.

Postpaid Subscribers
Bharti Airtel postpaid subscribers jumped in the second quarter. Vodafone Idea raised tariffs with its postpaid user base remaining largely stable.

Churn Rate
Bharti Airtel’s churn rate has been falling since the quarter ending December 2019 and was on a par with Reliance Jio’s in the three months through September 2020.

Average Revenue Per User
Bharti Airtel’s average revenue per user—or what the company earns per subscriber per month—was the highest in the second quarter. It rose 27% year-on-year compared with Reliance Jio’s 14% growth and Vodafone Idea’s 11% increase during the period.

Revenue Growth
Bharti Airtel’s revenue growth has largely converged with that of Reliance Jio’s due to its relatively less price-sensitive subscribers.

Data, Voice Usage
Bharti Airtel has the highest average data and voice usage, which implies more of its subscribers are opting for unlimited plans.

Wireless Subscribers
The Sunil Bharti Mittal-led company reported gross subscriber addition for the third straight month since the national lockdown. In September, it added twice as many subscribers as Reliance Jio. It added 3.8 million gross subscribers in September after a cumulative loss of 12.4 million during the lockdown.

Bharti Airtel has also added the most active subscribers in September. Its inactive subscriber base is significantly lower than its peers.

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