For the second quarter in succession, Bharti Airtel Ltd has beaten Reliance Jio Infocomm Ltd’s net subscriber additions figure by a wide margin. Airtel added 14.2 million subscribers in the December quarter, on the back of the addition of 13.9 million in the preceding quarter. Jio’s comparable numbers for the two quarters stand at 5.2 million and 7.3 million subscribers respectively.
“Jio’s lower growth rates appear to be a function of capacity constraints, especially in large urban centres. Some of this may get corrected after the spectrum auctions, although even there the company needs to take a call on whether it should augment its 4G capacity, or hold back resources for a large 5G bet later,” said an analyst at a domestic institutional brokerage, requesting anonymity.
This, of course, comes on the back of the tariff hikes taken last December, and an improvement in subscriber mix. The average revenue per user (Arpu) has risen 23% from the year-ago period to ₹166. 4G users now account for 54% of the total subscriber base, compared to 44% a year ago.
Performance of Airtel
Whatever the reason, the fact remains that Airtel has been a prime beneficiary. On a year-on-year basis, Airtel’s India mobile revenues have grown by 32.4% and its EBIDTA has jumped 61%. EBIDTA stands for earnings before interest, tax, depreciation, and amortization.
Meanwhile, there has been a considerable improvement in Airtel’s Africa operations as well. About a year ago, the Africa business has turned around with the subsidiary reporting much better profit margins.
In the past two quarters, even revenue growth has picked up. Last quarter, revenues grew 23% in constant currency and EBIDTA rose 28% year-on-year.
Some analysts worry about the consequences of Airtel’s outperformance. “While market share gains are playing out (for Airtel), the moderation in Jio’s subscribers will likely delay tariff hikes,” said analysts at Jefferies India Pvt. Ltd in a note to clients.
Airtel’s Rival’s Performance
News reports suggest Vodafone Idea is close to a capital raise, which may help it arrest the decline in its subscriber base as well, further intensifying the battle for subscribers.
Jio’s revenues, too, have grown by 32.4% year-on-year, although like-for-like subscriber revenue growth is lower, say analysts. Jio’s revenues include a contribution from its home broadband business starting this year, while Airtel has taken a hit on international roaming revenues owing to the pandemic.
But while there are all these positives, one big shift that has occurred in the past three months is that the Bharti Airtel stock has risen from the ₹400 levels to well over ₹600. Its outperformance is now better appreciated on the Street, leaving relatively less room for upside.