How has Reliance Jio's entry affected Vodafone, Airtel and Idea?
A look at how Jio has impacted the growth of Airtel, Vodafone and Idea ever since its entry last September
Reliance Jio took the cellular industry by storm last immediately after its entry into the market. Ever since the Mukesh Ambani led company has entered the race, it looked like its competitors were looking at a “Us against Jio” kind of war. Jio has rolled on like a juggernaut almost squeezing out every bit from three of the largest players in India namely, Bharti Airtel, Vodafone and Idea Cellular by strongly grown its subscriber base since its launch in September last year. According to TRAI, last month the telecom subscriber base in India crossed the 1.2 billion mark and Jio led the race for most number of new additions. Reliance Jio added 4.7 million users month on month as compared to its competitors. Airtel added 2.09 million new customers followed by BSNL, Vodafone and Idea Cellular.
How has Reliance’s entry affected the quarterly results of the top 3?
Bharti Airtel –
The subscriber base for Airtel did not feel a massive blow. In the quarter that ended in September 2016, Airtel had 36308.8 crore subscribers and by the end of December 2016 there was only a marginal rise in the number and it stood at 36456.4 crore. The fourth quarter that ended In March 2017 saw Airtel have a registered user base of 37235.4 crore while in the latest quarter release (Q1) the subscriber base stood at 37987 crore.
Unlike its user base, Airtel felt the shock of Jio’s entry in its total revenue earning. In the quarter ended September 2016, the total revenue was Rs 24651.5 crore and by the third quarter last financial year the revenue dropped to Rs 23335.7 crore. The total revenue dropped further in the last quarter for the financial year as Airtel recorded a revenue of Rs 21934.6 crore but saw a marginal rise in the first quarter this financial year as the total revenue stood at Rs 21958.1 crore.
It looks like Airtel saw a humungous loss with the entry of Jio. The net income had the largest setback as it dropped 75 per cent year on year to Rs 367 crore while this was a marginal drop from the previous quarter which was recorded at Rs 374 crore rupees. The net income in the quarter ended December was Rs 503 crore as compared to Rs 1460.7 crore in the quarter that ended in September.
In a statement after the release of the Q1 results, Gopal Vittal, MD and CEO, India & South Asia, said: “The pricing disruption in the Indian telecom market caused by the entry of a new operator continued with industry revenues declining over 15% Y-o-Y, creating further stress on sector profitability, cash flows and leverage. Consequently, our revenues declined 10% and EBITDA margin eroded by 5.3% Y-o-Y. We remain committed to providing the best value and experience to our customers and continue to invest towards it. As a result, our network witnessed data and voice traffic growth of 200% and 34% Y-o-Y respectively. We also added 5.2 Mn data customers in the last quarter – our highest ever.”
On 20 March 2017, Vodafone announced an agreement to combine its subsidiary, Vodafone India (excluding its 42% stake in Indus Towers), with Idea Cellular.
During the first quarter Vodafone’s customer base grew by 2.9 million (Q4: 4.4 million) and ended the quarter with a closing customer base of 211.9 million. Data browsing revenue declined -20.4%* (Q4: -15.9%*) reflecting further ARPU dilution from lower unitary prices, which declined -67% year-on-year (Q4: -38%).
Vodafone recorded a 14.2% decline in voice revenue in the April-June period as compared to the 13.2% fall in the prior quarter, the company said “The benefit of higher incoming revenue and a larger customer base was offset by a 32% on-year decline in voice prices as the market moved to unlimited voice tariffs.”
In an interview with exchange4media last month, Sunil Sood, CEO, Vodafone India, said, “Competition in the telecom sector has always been stiff, there have always been new entrants, a decade ago we had almost 10 new operators coming in, now we have another one, we welcome the competition and it has always made us strive that much better for the customers’ benefit. So once again I see consumers benefit from all that is happening because you have to remodel what you are doing to make it more effective, remove the wastage and be more efficient. Therefore that remodelling of your company helps you to give better offers to your consumers at more appropriate prices and other offers.”
Idea’s subscriber base has seen a growth in all the previous quarters except Q1 this year where the customer base stood at 189 million as compared to 189.5 million in the previous quarter ended in the last financial quarter (Q4). By the end of Q2 last financial year the customer base was 185.2 million as compared to 178.8 million in Q1.
The company reported losses of Rs 385 crore between the second and third quarter while between the fourth quarter of the last financial year and the first quarter this financial year the losses were reported at Rs 815.9 crore.
Even though Airtel and Vodafone have had a decent run in increasing their subscriber base, while Idea has just seen a marginal change there is no evidence of successful incomes and revenues. Over and above the raging war between telecom industries customers are making the most of low call rates and data charges. With the merger of Vodafone and Idea slated for next year and the with reports doing the round for Idea’s smartphone that will compete with Reliance’s Rs 1500 phone, the next three quarters will reveal a clearer picture of the cut-throat economic scenario in the Telecom sector.
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