Bharti Airtel’s recent quarterly report came as a pleasant surprise for many with the company announcing that its net loss for Q2 (July- September) has narrowed by 97% and stands at Rs 763 crore. A sharp decline from the 2019 Q2 loss of Rs 23,045. But for people who have been tracking the company’s strategy, it was on expected lines.
Even as telecom giant Reliance Jio aggressively marches towards the goal of having 500 million subscribers, Bharti Airtel’s strategy of targeting the higher average revenue per user (ARPU) and increasing active user base seems to be working. Airtel ARPU increased to ₹162 from ₹157 in June 2020. This is when Jio has expanded in rural markets, which are seen as a low ARPU segment. Jio’s ARPU was ₹140.3 at the end of Q1 in June 2020. Airtel has managed to keep the ARPU growing despite adding a significant number of new users to its 4G network.
“Biggest Positive in @Airtel_Presence Q2:- 1.4 crore 4G subscriber additions & 1.3 lakh broadband additions Growth in ARPU, without tariff hike, reflects the confidence of high paying consumers in Airtel’s network. 1.3 lakh home broadband addition – highest Addition on the back of new plans introduced at the end of Q2. Full benefit of these new additions will reflect fully in Q3FY21,” tweeted research analyst Soumeet Sarkar of Capitalmind.
It is not just ARPU, Bharti Airtel’s strategy of letting go of non-active users seems to have worked as well. While only 78% of Jio’s 400 million subscriber base was active, Bharti Airtel with 320 million subscribers had over 97% active users, according to Telecom Regulatory Authority of India’s (TRAI) July report.
Lower ARPU and increasing inactive subscriber base not just affects the profit margin but can also adversely impact Jio’s expansion plan including its ambitious plan of launching low cost smartphones with Google.
But a bigger worry for the Mukesh Ambani-owned firm is the impact these low paying subscribers have on the network with their excessive data consumption. According to a report by mobile analytics firm OpenSignal, Reliance Jio had poor network quality and lagged behind Airtel on various network assessment parameters like video experience, download and upload speed.
While expanding the capacity will be the logical move, Reliance Jio also faces spectrum constraints. While it would look at 5G spectrum auction as a possible relief, Bharati Airtel may want the government to go slow on this with its latest statement of planning to abstain from the auction. “The 5G ecosystem is yet to develop here and the prices are very high and we can’t afford them,” said Bharti Airtel CEO Gopal Vittal in a post earning call according to a news report.