Airtel Tariff Hike Strengthens Case For Telecom Duopoly In India

The prospect of a potential telecom duopoly in India has strengthened after Bharti Airtel Ltd.’s tariff hike, even as Vodafone Idea Ltd. languishes.

The New Delhi-based telecom operator has raised the price of its minimum recharge plan to Rs 155 per month from Rs 99 per month in 19 out of 22 telecom circles in India. The hike is on a par with that of its larger rival, Reliance Jio Infocomm Ltd., which is offering 2 GB of data and unlimited calling with 28 days of validity at the same price. Vi has a similar offering at Rs 179.

This means Airtel and Jio will now earn more from each subscriber leaving Vi.

Vi lost 2.47 million subscribers in December, while rivals Reliance Jio and Airtel gained 1.70 million and 1.53 million, respectively, according to the data released by the Telecom Regulatory Authority of India. A total of 12.49 million wireless subscribers in India submitted requests for mobile number portability in December.

As of Dec. 31, Airtel and Reliance Jio had a subscriber market share of 32.16% and 37.14%, respectively, according to TRAI data. Their revenue market share stood at 37% and 41%, respectively, according to a Jefferies note dated Feb. 20.

Effectively, billionaires Sunil Mittal and Mukesh Ambani now control 80% of Indian telecom.

Questions emailed to Airtel on Wednesday remained unanswered at the time of publication.

Due to an improving subscriber mix, Bharti Airtel stands to gain more than Reliance Jio from the churn at Vodafone Idea, according to Jefferies.

In the three months ended Dec. 31, while gross subscriber additions rose to a 17-month high of 93 million, net additions remained soft due to elevated levels of churn.

"Bharti’s 4.4 million net subscriber adds surprised positively, driven by higher gross adds and lower churn, while Jio’s net subscriber adds of 5.3 million and Vi’s 6 million subscriber loss disappointed," Jefferies analysts Akshat Agarwal and Ankur Pant wrote in the Feb. 20 note.

Moreover, Airtel’s 4G subscriber base expanded the fastest in five quarters. That helped the New Delhi-based telecom operator outperform rivals on revenue growth.

Then comes the matter of people actually using their phones.

Although Reliance Jio’s active subscriber base rose by 3 million to 391 million in December 2022, Airtel's base jumped by 6 million to 365 million, according to TRAI data. Bharti Airtel, in fact, added 0.1 million active subscribers in Haryana and 0.2 million in Odisha—circles where it first implemented the tariff hike in November 2022.

Vi, again, languished as its active subscriber base dipped by 0.1 million to 210 million.

At 3.8 million, Airtel also added the highest number of mobile broadband users in December, compared to 1.7 million net additions by Reliance Jio and 0.4 million by Vodafone Idea.

This points to higher premiumisation at Airtel, even as it is set to earn more from tariff hikes.

A delay in the deployment of 5G services by Vodafone Idea is set to play into the hands of Airtel, which is investing heavily in network expansion.

Airtel wants to use 5G as a lever and a pivot to drive its postpaid growth, the company’s management said in a post-earnings call on Feb. 8. “I think the rollout is going to happen across urban India by March 2024,” Gopal Vittal, chief executive officer at Bharti Airtel, said during the analyst call. “The pace of rollout beyond urban India is something that will be dictated by how 5G devices shape up.”

At Rs 6,400 crore in October-December 2022, Airtel's mobile capex in India was the highest in three years due to 5G rollout.

On the flip side, Vodafone Idea’s capex in Q3 moderated to the lowest in two years as the firm remained cash-strapped amid sky-high debt, limiting its ability to roll out 5G services any time soon. A reduction in broadband sites due to the shutdown of 3G sites doesn’t help matters either.

However, the management sounded hopeful, even confident, of launching 5G services before the September 2023 deadline.

“We have the advantage of having the latest 4G equipment and technologies capable of upgrading to 5G,” Akshaya Moondra, chief executive at Vodafone Idea, told analysts during a post-earnings call. “The 5G rollout has been considered as part of our overall capex plan, and we continue to work towards rolling out 5G to our consumers, which can be executed quickly once funding is in place.”

As on Dec. 31, Vodafone Idea's total gross debt stood at Rs 2,22,890 crore, which included Rs 1,39,800 crore in deferred spectrum payments and adjusted gross revenue dues of Rs 69,910 crore.

Amid the doom and gloom, Vodafone Idea has a silver lining of sorts—its subscriber base.

True, the joint venture between Aditya Birla Group and the UK’s Vodafone Group Plc is bleeding prepaid users, but the number of its postpaid subscriptions has actually increased by 2.16 million in the year as of Dec. 31, 2022, as the company’s latest earnings statement showed. Its 4G subscriber base has grown by nearly 4% over the same period, to 121.6 million.

That’s translated into higher average revenue per user as well: Rs 135 in Q3 of FY23 versus Rs 115 in Q3 of FY22.

How long loyalists will persist with Vodafone Idea is anybody’s guess. With the deadline to roll out 5G services fast approaching, it may not be that much longer.