Jio pips Airtel on strong Q1 subscriber additions
Led by better-than-expected growth in subscribers as well as per-user revenues, Reliance Jio outperformed both the street expectations as well as peer Bharti Airtel on the operational front. While Bharti lost subscribers because of the pandemic, especially at the entry level, Reliance Jio managed to improve its tally by nearly 3 per cent on a sequential basis.
Most analysts expected the company to report a flattish subscriber base given the ongoing consolidation of SIM cards and lack of physical recharge options.
The other metric that helped drive the Q1 show was a 7 per cent sequential uptick in average revenue per user (ARPU) as compared to analyst estimates of a marginal dip. The company highlighted that the growth in ARPU was a function of price hikes taken in the December quarter and steps taken by the company which enabled convenient recharge options for the customers.
Bharti reported a 1.9 per cent increase in ARPU driven by residual impact of the price hikes in December and improving customer mix. The gains for Bharti came despite weak international roaming revenues and lack of physical recharge option due to the lockdown.
The combination of subscriber gains and ARPU helped Jio report a 12 per cent rise in revenues, while Bharti reported a marginal fall in the
quarter. Given the strong revenue gains, Reliance Jio’s margin performance too was superior to Bharti’s with a 238 basis point gain to 44 per cent. Bharti, too, reported a steady improvement in margins with gains of 140 basis points to about 41 per cent.
Jio highlighted that the gains on the margin front came on the back of operating leverage and increasing scale. This reflected both on the top line front as well as on costs. The company is using automation and cost control
measures to drive profitability. On the APRU trajectory, Bharti Airtel indicated that organic ARPU growth has been modest on the back of a shift by customers from 2G to 4G and upgrades to higher value plans. However, tariff hikes will have to be taken and ARPUS will need to increase to ~200 and then on to ~300 to sustain operations.
Both companies highlighted that subscriber growth is returning and the situation should improve in the coming months.