The latest subscriber data released by TRAI (Telecom Regulatory Authority of India) shows market leader Reliance Jio might be losing steam. Although it's a short-term trend; the timing can be dreadful for rival telcos. Why?
Incumbent operators like Vodafone Idea and Bharti Airtel have been planning to increase tariffs. While Vodafone Idea has made it clear that it will lead the group with hikes; Airtel has said it will follow such a move immediately. The stance of Jio on tariff hikes is still unclear, but some analysts believe the telco might not join the bandwagon.
For instance, in a recent report, Goldman Sachs analysts said that following their conversations with investors, there's a view that Jio will not raise prices and as such Airtel and Vodafone Idea may have to roll back prices if they raise them.
This was prior to the latest TRAI's subs data. The slowdown in Jio's net subscriber additions for two consecutive quarters means the telco is unlikely to raise tariffs. Jio has previously stated its target to reach 500 million subs, and reached 404 million in September 2020.
The latest subs data is particularly intriguing for two reasons: slowdown in Jio's net additions and increase in Airtel's net additions for two straight months. For instance, Airtel added 3.78 million wireless subs in September compared to Jio's 1.46 million. In August, Airtel added 2.9 million in comparison to Jio's 1.86 million. Until July, Jio was leading the race in net subs additions.
Experts say that tariff hikes are almost inevitable for Vodafone Idea while Airtel is hoping for its ARPU (average revenue per user) to reach Rs 200 in the medium-term, and eventually Rs 300. Its current ARPU stands at Rs 162.
"The continued subscriber losses and the moderate growth in ARPU strengthen the case for a significant tariff hike, to avoid a duopoly market," said analysts at JM Financial in October 29 report on Vodafone Idea.
"Vodafone Idea's inability to invest in the network is driving subscriber decline, in turn, further impacting its ability to invest. We believe this spiral can be broken only with significant ARPU increase and fund infusion. We expect the company to take action on both fronts..." said analysts at Edelweiss Securities.
Vodafone Idea is reportedly evaluating plans to raise about Rs 25,000 crore in the short-term to invest in network upgradation and clear a part of its AGR (adjusted gross revenues) dues.
"The slowdown in Jio's subscriber base would put the other two operators in jeopardy as they cannot raise tariffs alone, especially Vodafone Idea which has been losing subscribers for several quarters. When everyone believed that the fight in the telecom sector would shift from tariffs to service quality; Jio's subs slowdown could likely extend the tariff fight," says a telecom consultant.
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