It is for the first time that in a quarter, since the launch of Reliance Jio in September 2016, the revenues for Bharti Airtel and Vodafone Idea (VIL) have not declined, when compared sequentially.
Thanks to the move by the incumbents to remove the low Arpu (average revenues per user) customers started in November last year, there has been some recovery in the financial performance of the two companies.
While Bharti Airtel witnessed an increase of 4.35% quarter-on-quarter in the company s India mobile services revenue to Rs 10,632.3 crore for the three months of January-March 2019, VIL saw its revenues remain flat sequentially at Rs 11,775 crore.
Bharti and VIL introduced the minimum recharge scheme on a national basis during Q3. This has resulted in a decline of 53.2 million low Arpu subscribers for VIL in the quarter ended March 2019, taking the overall subscriber base to 334.1 million versus 387.2 million in the previous quarter. Meanwhile, Bharti arrested the decline in subscriber base sequentially, which remained flat at 283 million subscribers versus 284 million in Q3FY19, but has come off from the 333 million levels seen in the quarter before.
Incumbent operators like Bharti Airtel have been facing competitive pressure from Reliance Jio for the last several quarters and have been trying to bring about measures to make up for the loss accruing to them by providing below-cost tariffs. In one such measure, in October 2018, Bharti Airtel decided to weed out those customers from its network who do not recharge every month for a minimum Rs 35.
The most striking aspect about this measure was that during the December quarter the company lost 48 million users; however, in Q4FY19 it arrested the fall and lost just 1.5 million subscribers, though it trails Reliance Jio in terms of mobile services subscribers.
The bigger gain of the move can be seen in the substantial Arpu recovery seen by both the incumbent operators during the quarter. While VIL s Arpu surged to a sharp `104 against `89 in the previous quarter, Bharti s stood at Rs 123 versus Rs 104.
However, Reliance Jio, which has been ruling the industry on Arpu since the time it announced its first full earnings and operating metrics in October 2017 until now, has seen them decline over a period of time. After suffering a sharp decline of 11% q-o-q in the January-March 2018 quarter when the Arpu fell to Rs 137 from Rs 153, the Arpu a year later stands at Rs 126. With Bharti now at Rs 123 Arpu levels, it is inching closer to Jio s Arpu.
According to analysts, with operating metrics improving, the sector recovery is expected to continue. With further tariff tweaks by Bharti/Vodafone Idea yet to take effect and 4G penetration still low at 24-31% of incumbents subscriber base, the sector s revenue recovery is set to continue, analysts at CLSA observed in a latest report.
Also, with revenue market shares for Bharti, VIL and Jio having converged at about 31%, the likelihood of any material tariff cuts by Jio has also reduced, they said. We see Bharti as best placed to play the sector s revenue recovery given its 4G network, execution edge, and fall in gearing .
Bharti s 4G subscriber additions remained strong in 4QFY19 with 10 million subscribers versus 11 million in the previous quarter. As for VIL, analysts observed that 4G net subscriber additions slowed down to 5.4 million in the three months of January-March 2019 versus 9.5 million in Q3FY19 and 8.4 million in Q2FY19. This was despite an increase in 4G pop coverage to 65% from 64% in Q3FY19, analysts at UBS noted.