Airtel vs Jio | 6 Point Analysis

Indian Telecom Sector Leaders – Airtel vs Jio Comparative Analysis

Introduction

Airtel vs Jio – Where to Invest? Telecom sector in India seems to have a bright future due to many levers like majority of working culture shifting to “work from home” . This will lead to increased demand for internet as well as voice connectivity. In this blog , we will discuss about the Telecom sector leaders Airtel and Jio.

Airtel vs Jio Comparison – 6 Point Analysis

Let us compare these two telecom sector leaders on following parameters. Airtel is operational in two countries, India and South Africa. Here, for comparison we are taking into consideration only Indian businesses of Jio and Airtel.

Subscriber base:

• As seen, Reliance Jio has outperformed Bharti Airtel in terms of subscriber growth.
• However, in Q4FY20 Bharti Airtel posted positive growth in subscribers. This is a positive sign and indicates that the turnaround in growth has started.
• Also given the on-going issues with another telecom giant, Vodafone Idea, it is likely that their subscriber base will migrate towards Jio and Airtel.

Average Revenue per user (ARPU):

• Airtel registered a strong growth of 25.2% YoY, whereas Jio’s ARPU growth declined 1.9% YoY.
• Jio’s de-growth in ARPU can be mainly attributed to a higher base and decline in usage by subscribers as Jio undertook price hikes. Hence, increasing subscriber base but declining usage resulted in negative ARPU growth for Jio.

Wireless data consumption (Cr GB):

• Airtel registered a robust growth of 74.2% YoY in data consumption as against 34.3%YoY growth registered by Jio. 

Per Capita data consumption (GB/Month):

• Airtel’s per capital  data consumption growth is 35.5% YoY whereas it is 3.7% YoY for Jio.
• Customer stickiness is better in Bharti Airtel as they did not give free data, etc to its subscribers as promotional strategy.
• Whereas, Jio offered various promotional strategies in which it offered free data. Eventually it was reduced and Jio undertook price hike.
• This led to subscribers limiting their usage which ultimately lead to lower per capital consumption.

Voice on network (Cr Minutes/Day):

• Reliance Jio has outperformed Bharti Airtel by registering a growth of 19.6% YoY as against 12.4% YoY growth.

Per capita voice consumption (Minutes/Day):

• Airtel outperformed Jio in this segment as well by registering a growth of 12.5% YoY as against a de-growth of 6.3% YoY.
• The major reason for decline is Jio started charging for inter network calls.

This summarizes our 6-point analysis on Telecom sector leaders Airtel vs Jio, where we can see that Airtel is outperforming in many categories.

Indian Telecom Sector

• Given the recent trend of investment in Jio platforms by silicon valley giants like Google, Facebook, Intel, Qualcomm, etc, indicates how Jio’s huge subscriber base is considered lucrative for cross selling.
• These investments also show how foreign investors are perceiving Indian telecom sector as an attractive investment opportunity. It is also quite possible that we may get to witness a similar traction of investments in Bharti Airtel.
• The sector seems to be consolidating in the recent times and has gone past its price war phase. The key beneficiaries of this are the two telecom giants – Jio and Airtel.
• Decline of Vodafone Idea in India  – This can be a lever for Jio and Airtel as Vodafone idea subscribers will migrate towards these two players.
• Airtel seems to be handing the issue of AGR dues far better than that of Vodafone Idea. This is evident from the price movement of their share prices in recent times.

• Bharti Airtel’s stock is providing a much better rally as against Vodafone idea. In case of Vodafone Idea the stock prices are highly dependent on development in payment towards AGR dues.

• On 23^rd July’20,  Vodafone – Idea won a case in which the company will receive the dues from Income Tax department worth INR 833 crore, which will provide some ease to Vodafone-Idea’s cash crunch. But it still has a long way to go in paying ~INR 50,000 crore AGR dues.
• Whereas Bharti Airtel seems to be in a good position to meet the AGR dues by monetizing assets like Bharti Infratel and their South Africa business.

Conclusion

• To conclude, it seems that Indian telecom sector will register healthy growth in upcoming times due to increasing dependence on data.
• We are quite bullish on this sector. Since Vodafone-Idea is not much in a good shape recently because of AGR dues, it will largely benefit the other two Telecom leaders– Airtel and Jio.