Bharti Airtel makes about Rs 200 per user today. That’s almost the same, Rs 196, as it was between April and June 2017, seven years ago, a few months after Reliance Jio came in with cheaper plans and drove telecom tariffs down.
But today’s Rs 200 would mean more for Chairman Sunil Mittal (net worth of $14.5 billion, as per Forbes) because it comes with nearly one extra customer for every two it had in mid-2017. No wonder then, the shares of Bharti Airtel are at an all-time high, and investors who have held on to their stock of the company have made over three times on their bet.
So how did Airtel recover from the Jio onslaught?
It helped that the Indian telecom sector was down to three private players (Airtel, Jio and Vodafone Idea), aside from the state-owned BSNL and MTNL. Vodafone Idea’s financial struggles also helped both Jio and Airtel as the subscribers of VI moved over for cheaper plans and/or better coverage.
So, the tariffs recovered and the users increased. And, as the number of users increased, more data was consumed, resulting in more revenue for the company. In the last few years, the consumption of video has grown manifold, thanks to the popularity of Tiktok at first (which is now banned in India), later Instagram reels, as well as streaming platforms like Netflix, Amazon Prime, Hotstar, and, the recently launched, Jio Cinema.
The change in preferences meant that a lot of customers upgraded from feature phones to smartphones. Many users moved from prepaid plans to postpaid ones. There was a concerted effort from the company to make prepaid plans less attractive, especially for subscribers who didn’t spend more than the minimum plan amount. The price of entry-level prepaid plans went up from Rs 35 to Rs 155 between December 2019 and February 2023.
Bundling together services like direct-to-home, postpaid mobile, and broadband under Airtel Black allowed the company to make more from each user who could afford it. Simplifying the process for international roaming, at a time when the number of Indians travelling abroad rose sharply, may also have been helpful.
What next for Airtel, Jio and Vodafone Idea?
It is widely expected that mobile and internet tariffs may rise but not before the general elections next year. Revenue will rise once the tariffs are raised and that’s good for the shareholders, not so good for the subscribers.
All three companies — Reliance Jio, Airtel and Vodafone Idea — have asked the government to reduce licence fees from the current 8 percent to 5 percent. They also want a cut in goods and services tax from the current level of 18 percent, as well as a cut in spectrum usage charges. If the government agrees, the companies will gain and so will their shares.
All three operators also want OTT platforms to pay carriage fees for using their network for similar services. The Telecom Regulatory Authority of India (TRAI) is reportedly considering their request. If approved, this could be a controversial issue, but at the same time, good for the operators as it adds another revenue stream.
Meanwhile, the rollout of the 5G network could be another catalyst. Airtel launched its high-speed internet service, Airtel XStream in August 2023. Airtel is expected to launch its 5G services in all major cities by December 2023.
Brokerage firm CLSA raised its price target on Bharti Airtel to Rs 1,100 from Rs 1,030 earlier on September 8. It expects Airtel's ARPU to rise to Rs 257 by the financial year ending March 2026.
First Published: Sept 14, 2023 9:50 AM IST
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