Jio faces Airtel battle as Vodafone Idea struggles

India's Reliance Jio has a fight on its hands.

While Vodafone Idea continues to flounder, Bharti Airtel, Jio's other big rival in the Indian telecom market, is proving defiant.

Latest results from the three operators point to a strong performance for Airtel in the September-ending quarter, suggesting it could mount a challenge to Jio in the future.

Jio itself reported a revenue increase of about one third, to roughly $2.3 billion, compared with the-year-earlier period, while its earnings (before interest, tax, depreciation and amortization) rose 49%, to more than $1 billion. Net profit soared 185%, to $402 million.

Although revenue and earnings looked stellar, a slowdown in subscriber growth is troubling. It could add only 7.3 million new users during the quarter, compared with a quarterly average of 16.8 million in the last year.

Jio is offering less than it used to with its 4G feature phone service, which might have hurt demand in the quarter. According to IDC data, shipments of the JioPhone ran to about 1.1 million units.

When compared with Airtel, which added 14 million subscribers during the quarter, Jio's figures look disappointing, even though it crossed the 400-million mark in customer numbers.

Table 1: Head-to-head performance of Indian operators

Reliance Jio Bharti Airtel Vodafone Idea
Revenue ($M) 2,330 3,458 1,445
—change 33% 22% -0.5%
EBITDA ($M) 1,026 1,572 554
—change 49% 32% NA
Net profit ($M) 402 -102 -962
—change 185% -742% NA
Monthly ARPU ($) 1.93 2.16 1.59
—change 14% 27% 11%
Subscribers (millions) 405.6 294 271.8
—change 14% 5% -13%
Source: Quarterly results of companies.

Airtel's quarterly revenue was up 22% year-on-year and 3.5% quarter-on-quarter, to about $3.5 billion. On the operating profit front, as well, it showed a strong performance, with quarterly earnings rising 32%, to nearly $1.6 billion.

While it posted a net loss of $102 million, that was mostly because of one-time regulatory cost. Airtel suffered because of the loss of roaming revenue as a result of restrictions on international travel.

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Vodafone Idea, on the other hand, continues to struggle with falling revenue and a dwindling subscriber base. It posted sales of about $1.4 billion, a drop of 0.5% year-on-year. Earnings were $558.6 million for the September-ending quarter.

The service provider plans to raise $3.36 billion through a combination of debt and equity. A good part of these funds will be used to upgrade and modernize networks to improve quality of service. They might also support participation in an upcoming spectrum auction.

Measuring performance on KPIs

All three of the major telcos have witnessed growth in average revenue per user (ARPU), a key metric.

Airtel's ARPU rose a sharp 27% year-on-year, to $2.16 a month, while Jio's grew 14%, to $1.93. Vodafone Idea's figure was up just 11% and remains the lowest of the three at $1.59.

To Airtel's credit, it has added 800,000 thousand postpaid subscribers, one of the highest quarterly increases in recent times. That is likely to explain much of the ARPU increase, as postpaid ARPU is almost three times that for prepaid users.

Of particular note was a major spike in 4G subscriber additions that will have boosted customer spending. And it shows that high-value subscribers continue to prefer Airtel to Jio and Vodafone Idea.

The latter continues to lose customers, with subscriber numbers declining 8 million, to 271 million, in the recent quarter, even as rivals managed growth.

A monstrous debt of $15.6 billion and huge statutory dues are affecting its network modernization plans. That has led to continuous subscriber churn and weakened Vodafone Idea's competitive position.

— Gagandeep Kaur, contributing editor, special to Light Reading

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