Bharti Airtel is bracing for a grueling battle to protect its average revenue per user (ARPU) and maximising the revenue market share (RMS), as the telecom market leader tries to weather the brutal impact of Reliance Jio Infocomm’s free services that it calls “predatory” an expects continue through March.
The company is also looking to monetise tower assets in five African markets — having already done so in 10 out of the 15 it is present in — to generate an additional up to $600 million (Rs4,080 crore) to beef up its war chest as the price war with Mukesh Ambani-controlled Jio is expected to escalate.
“With predatory pricing unleashed by an operator, it’s going to be an ARPU game going forward, and all about maximizing RMS in an industry that will see rapid consolidation over the next 12-15 months,” managing director for India & South Asia Gopal Vittal said on Wednesday, without naming Jio.
He expects the total number of telecom players to “shrink rapidly in the short-to-medium term” as smaller operators are likely to increasingly struggle against the Big 4 of Airtel, Jio, Vodafone India and Idea Cellular in rolling out comparable broadband networks and also face bigger financial challenges.
Vittal was speaking on an earnings call a day after the company reported a 55% fall in third-quarter net profit to Rs 504 crore – its worst in four years – amid a first ever on-year revenue drop, hit by the impact of Jio’s free services and partly due to demonetisation.
Analysts said No. 3 Idea, which is expected to report results shortly, could perform a lot worse than the market leader, with most estimating a net loss, which will be the first ever in the telco’s history.
Vittal said Airtel’s immediate objective would be coming up with innovative “bucket plans that deliver value and lock the right ARPU customers” into its network and grow RMS, which would be the key performance metric, going forward. Airtel’s ARPU in the just-ended quarter fell 8.4% sequentially to Rs172.
Brushing aside analyst concerns about plunging data revenue yields at Rs 50 per GB, hit by Jio’s freebies, Vittal said there’s adequate data elasticity in the market, which can still pave the way for greater data consumption, and in turn, help maintain ARPU levels.
Vittal ruled out the immediate possibility of Airtel unveiling an aggressively priced 4G feature phone to take on Jio, asserting that such a device is unlikely to appeal to serious data customers and will primarily be sought out by people looking for cheap data. Jio’s parent Reliance Industries is believed to be working on an ultra-cheap 4G featurephone to attract more subscribers at the lower end.
The market leader’s global finance head, Nilanjan Roy, said the telco’s consolidated capital expenditure guidance for fiscal 2017 will likely be a tad below $3 billion.
Credit Suisse expects the company’s financial “pains to continue”, with incumbents, including Airtel, launching aggressive counter-tariffs in recent weeks that are likely to continue in response to Jio’s free services, a position seconded by brokerage Kotak Institutional Equities.
“We expect (Airtel’s) pain to continue for the next 3-4 quarters, but we also expect overall industry structure to improve substantially once the current tumultuous phase gets over, and Bharti would perhaps be in the best position once that happens,” Kotak said in a note.
Further, the brokerage said while the Sunil Mittal-led telco may have reported the “worst sequential dip” in wireless revenue and Ebitda in its history, “Bharti may have done better than most other operators” during the December quarter.
Brokerage Citi Research expects the fiscal fourth quarter trends to be “even worse”, but sees Airtel continuing to counter Jio, adding that actual usage trends would be only visible once the newcomer starts charging customers.
Analysts at Citi expect Airtel to be best placed to counter Jio, helped by its superior 3G/4G spectrum portfolio, balance sheet strength and execution.
The company is also looking to monetise tower assets in five African markets — having already done so in 10 out of the 15 it is present in — to generate an additional up to $600 million (Rs4,080 crore) to beef up its war chest as the price war with Mukesh Ambani-controlled Jio is expected to escalate.
“With predatory pricing unleashed by an operator, it’s going to be an ARPU game going forward, and all about maximizing RMS in an industry that will see rapid consolidation over the next 12-15 months,” managing director for India & South Asia Gopal Vittal said on Wednesday, without naming Jio.
He expects the total number of telecom players to “shrink rapidly in the short-to-medium term” as smaller operators are likely to increasingly struggle against the Big 4 of Airtel, Jio, Vodafone India and Idea Cellular in rolling out comparable broadband networks and also face bigger financial challenges.
Vittal was speaking on an earnings call a day after the company reported a 55% fall in third-quarter net profit to Rs 504 crore – its worst in four years – amid a first ever on-year revenue drop, hit by the impact of Jio’s free services and partly due to demonetisation.
Analysts said No. 3 Idea, which is expected to report results shortly, could perform a lot worse than the market leader, with most estimating a net loss, which will be the first ever in the telco’s history.
Vittal said Airtel’s immediate objective would be coming up with innovative “bucket plans that deliver value and lock the right ARPU customers” into its network and grow RMS, which would be the key performance metric, going forward. Airtel’s ARPU in the just-ended quarter fell 8.4% sequentially to Rs172.
Brushing aside analyst concerns about plunging data revenue yields at Rs 50 per GB, hit by Jio’s freebies, Vittal said there’s adequate data elasticity in the market, which can still pave the way for greater data consumption, and in turn, help maintain ARPU levels.
Vittal ruled out the immediate possibility of Airtel unveiling an aggressively priced 4G feature phone to take on Jio, asserting that such a device is unlikely to appeal to serious data customers and will primarily be sought out by people looking for cheap data. Jio’s parent Reliance Industries is believed to be working on an ultra-cheap 4G featurephone to attract more subscribers at the lower end.
The market leader’s global finance head, Nilanjan Roy, said the telco’s consolidated capital expenditure guidance for fiscal 2017 will likely be a tad below $3 billion.
Credit Suisse expects the company’s financial “pains to continue”, with incumbents, including Airtel, launching aggressive counter-tariffs in recent weeks that are likely to continue in response to Jio’s free services, a position seconded by brokerage Kotak Institutional Equities.
“We expect (Airtel’s) pain to continue for the next 3-4 quarters, but we also expect overall industry structure to improve substantially once the current tumultuous phase gets over, and Bharti would perhaps be in the best position once that happens,” Kotak said in a note.
Further, the brokerage said while the Sunil Mittal-led telco may have reported the “worst sequential dip” in wireless revenue and Ebitda in its history, “Bharti may have done better than most other operators” during the December quarter.
Brokerage Citi Research expects the fiscal fourth quarter trends to be “even worse”, but sees Airtel continuing to counter Jio, adding that actual usage trends would be only visible once the newcomer starts charging customers.
Analysts at Citi expect Airtel to be best placed to counter Jio, helped by its superior 3G/4G spectrum portfolio, balance sheet strength and execution.
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