India's Bharti Airtel has surprised the industry with much better financial results in several areas, even as it posted a loss for the quarter ending March 2020.
Airtel recorded a loss of 52.37 billion Indian rupees ($691 million) in the January-to-March quarter, mainly because of fees it owed the government after an unfavorable court ruling last year. Archrival Reliance Jio, by contrast, reported a profit of INR23.3 billion ($307 million) for the same quarter. The results of the two service providers are significant because they tell a very different data story. (See India court decision a massive blow for telcos.)
The data story
Airtel reported a sequential surge of 14% in average revenue per user (ARPU) in the March-ending quarter, much more than Jio's increase of 1.5%. Airtel's ARPU rose to INR154 ($2.03), from INR135 ($1.76) in the previous quarter, while Jio's crept up from INR128 ($1.68) to INR130 over this period.
This increase in ARPU is the result of a tariff hike announced in November 2019. Significantly, Jio had also increased its tariff at the time, but this hardly shows up in its results. "We believe that ARPU of INR154 is inadequate to turn a reasonable return on capital as a company and remain hopeful that ARPUs will get to INR200 [$2.64] in the short term and eventually to INR300 [$3.9], which is where it should be for a business like ours," said Gopal Vittal, Airtel's managing director and CEO for India and South Asia, during an investor call.
Airtel's customers also seem to be more data-savvy. The operator recorded a surge in data usage, from 14 gigabytes per customer per month in the December-ending quarter to 15 gigabytes in the March-ending one. At Jio, usage rose only slightly over this period, from 11.1 to 11.3 gigabytes.
This is surprising considering Jio offers only 4G and has more subscribers than Airtel. Jio had 376 million subscribers at the end of January 2020 and Airtel served around 328 million, according to data released by Telecom Regulatory Authority of India (TRAI). The data suggests Airtel has a bigger number of heavy-spending customers Jio. Further, Jio was able to add subscribers by offering free data services and heavily discounted devices. It seems these customers stopped using Jio SIMs once the company raised tariffs. (See RJio will gain most from India's tariff hike.)
The home broadband surge
The home broadband or wired broadband segment is likely to emerge as the next battleground between the two companies. Airtel signed up on 63,000 new subscribers in this segment in the January-to-March 2020 quarter, and also grew ARPU to INR803 ($10.60) from INR787 ($10.39) in the previous quarter.
Vittal referred to the addition of 63,000 home broadband subscribers as "one of the higher numbers that we've seen in many quarters," during the investor call.
Airtel is now focusing on covering as many cities as possible as fast as it can, in response to Jio's targeting of 20 million households. While Airtel currently claims about 2.43 million broadband customers, Jio has around 840,000.
Airtel would be justifiably thrilled about its latest results, since the company has been under pressure after Jio recently attracted a slew of new investors, including Facebook, Vista, Silver Lake and General Atlantic. (See Say hello to India's first digital service provider and Jio-Facebook deal bodes ill for Airtel and Vodafone Idea.)
— Gagandeep Kaur, contributing editor, special to Light Reading