Bharti Airtel replaces Vodafone Idea in second spot by mobile revenues

Focus on 4G subscriber growth balances rising cost for telecom firm.

Focus on data subscribers and weeding out low revenue customers have helped Bharti Airtel, while its peer Vodafone Idea could not implement the strategy.

However, network and content costs are on the rise for Bharti as it witnesses a steady rise in mobile data customers.

Further, Airtel’s reported mobile revenues for the April-June quarter (Q1) was Rs 10,866 crore. This makes it the number 2 player after Reliance Jio in terms of mobile services revenues, analysts claimed.

Vodafone Idea, which does not share the break-up of revenues, reported an overall revenue figure of. Rs 11,269 crore for Q1.

A Mumbai-based analyst noted that Vodafone Idea draws over Rs 600 crore from enterprise customers as well as broadband (or fixed services). Adjusting for it, the mobile service revenues for Vodafone Idea would be Rs 10,669 crore, making it the third-largest telecom firm by mobile revenue after Jio’s figure of Rs 11,679 crore.

Merged Vodafone Idea does not share the break-up of revenues. However, according to analysts, the comparative fixed revenue value should be around Rs 600 crore. Vodafone Idea said it reports only consolidated revenues.

Bharti Airtel lost only 1.5 million subscribers in June quarter, against 14 million subscribers lost by Vodafone Idea. What worked for Airtel was that its data traffic growth was 13 per cent sequentially and its average data usage was even higher than Jio’s (a 4G-only player) at 11.9 gigabyte per month per user.

However, as its mobile 4G data customers increased by 63.3 per cent to 95.2 million in Q1, compared to 58.3 million in the corresponding quarter last year, the company’s content costs also grew.

“In 2018-19 (FY19), content costs (for Airtel) rose 30 per cent year on year (YoY), reflecting the impact of content deals with Zee5 and Netflix,” said G V Giri, analyst, IIFL.

Its passive infrastructure charges, too, rose 12 per cent. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined on account of network expansion.

Airtel had managed to keep operating expenditure costs under control over the past two years, with only 7.5 per cent growth YoY.

The aggressive spending on content has, however, converted to rapid growth in Airtel’s 4G base in the past one year. In Q1 FY19, Airtel and Vodafone Idea had almost equal, roughly 58 million, 4G subscribers. In Q1 of 2019-20, Airtel raced ahead to 95 million subscribers, 11 million ahead of Vodafone Idea’s.While Vodafone Idea gained 4 per cent in terms of average revenue per user (ARPU), even as it lost 14 million subscribers, Airtel registered an industry-best ARPU of Rs 129 for Q1, a 5 per cent growth. In the bargain, it only lost 1.5 million subscribers.

Analysts see this as a positive sign. Airtel was able to retain its top slot in the market in terms of revenue, as its top line was up 2.8 per cent at Rs 15,345 crore. Vodafone Idea posted revenues of Rs 11,269.9 crore in Q1 and Jio’s revenues were Rs 11,679 crore. Bharti Airtel’s India revenue is an integrated number comprising wireless, landline and broadband services.

In Q1 of the current financial year, Airtel’s mobile revenues witnessed YoY growth of 3.7 per cent.

In comparison, Vodafone Idea saw revenue slipping 4 per cent sequentially, as its strategy to implement similar minimum recharge plans to boost revenue did not see the desired offtake.

Analysts at JM Financial said they did not think Airtel was gaining meaningfully at the expense of Vodafone Idea yet.

It is still incurring subscriber losses, albeit modest, and its revenue gains are driven entirely by ARPU - that is, minimum ARPU recharges and ‘Airtel Thanks’.

Lack of a counter to JioPhone and smaller 4G coverage, compared to Jio, remain key challenges.