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Revenue Growth on Cards for Jio, Airtel; User Loss to Weigh on Vi

Jio and Airtel Q3 Performance Analysis

Source and Citation: Originally reported in The Economic Times on January 9th, 2024 by an unnamed author.

Layman’s Analysis

The article anticipates the Q3FY24 performance of India’s top 3 telecom operators – Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi) – based on initial analyst estimates.

Jio and Airtel’s Growth: Jio and Airtel are expected to witness a 2-3% sequential revenue growth in their India mobile operations. This growth is attributed to robust customer additions and increased usage of high-speed 4G/5G data services.

Vi’s Struggles: Vi faces a stagnant growth outlook and significant customer losses due to financial struggles, raising concerns about its future prospects.

Airtel vs. Jio: Airtel may surpass Jio in average revenue per user (ARPU) at Rs 205 compared to Jio’s Rs 182. Jio, however, likely added more subscribers due to the popularity of its affordable JioPhone.

5G Rollouts: Airtel and Jio actively roll out 5G services, while Vi, facing funding issues, is yet to finalize its 5G launch plans.

Tariff Hikes and Data Usage: Without telecom tariff hikes, revenue expansion remains gradual. However, data usage continues to surge, especially for Jio, driven by events like the cricket World Cup and consumer device upgrades.

Revenue Growth on Cards for Jio, Airtel; User Loss to Weigh on Vi

Impact on Retail Investors

Diverging Outlooks

The varying outlooks for Jio/Airtel and Vi based on Q3 previews offer signals for retail investors.

Jio/Airtel Potential: Strong execution and pan-India 5G services with innovative offerings bode well for Jio and Airtel’s long-term dominance.

Vi’s Risks: Vi’s worsening subscriber losses and weak 5G capabilities pose existential concerns, making it a risky investment for retail investors.

Strategic Action Needed: Unless Vi takes bold strategic actions, the gap with stronger rivals may widen, limiting meaningful returns.

Impact on Industries

The telecom sector’s outlook is mixed, with stronger players like Jio and Airtel better positioned to capitalize on surging data consumption trends through 5G rollouts.

Industry Fragmentation Concerns: The widening gap with smaller rivals like Vi raises concerns, risking less competitive intensity in a sector limited to three private players.

Ecosystem Beneficiaries: Telecom gear vendors, tower firms, handset makers, fintech, and digital services partners benefit from the ongoing capex cycles at Jio/Airtel.

Long Term Prospects

Dominance and Challenges

In the long run, Jio and Airtel’s emerging dominance could influence entire digital value chains beyond connectivity, spurring innovation in various sectors.

Reduced Choices: However, this dominance reduces choices for consumers and ecosystem players, potentially skewing the market to just two large telcos.

Vi’s Challenges: Vi’s inability to compete may necessitate structural changes like fresh capital infusion or international partnerships for survival.

Short Term Outlook

Focus and Concerns

In the near term, significant shifts are unlikely within the telecom space, with Jio and Airtel concentrating on 5G coverage and customer acquisition.

Vi’s Struggles Persist: Vi’s attempts to avert further market share declines face challenges due to ongoing fundraising and turnaround issues.

Regulatory Situation: Regulators face no immediate pressure for intervention, as the Jio-Airtel duopoly situation is not yet alarming.

Potential Changes in 2023: Critical strategic changes at Vi may unfold towards the end of 2023 if survival concerns intensify, with signs of industry shifts likely in the next fiscal year starting April 2023.

Companies Impacted by Potential Q3 Growth in Indian Telecom

Indian Companies Gaining:

  • Reliance Jio:
    • Strong broadband user growth driven by affordable Jio Bharat phones and rising data consumption due to Cricket World Cup.
    • Highest expected increase in monthly average data usage per customer, potentially boosting revenue and ARPU.
    • Continued lead in 5G rollout could further attract customers and strengthen market position.
  • Bharti Airtel:
    • Expected sequential revenue growth fueled by steady subscriber additions and improved postpaid penetration.
    • Higher ARPU than Jio due to focus on premium segments.
    • Early 5G launch alongside Jio could attract tech-savvy customers and improve brand image.
  • Telecom Equipment Providers:
    • Companies like Tejas Networks, Sterlite Technologies, and Radisys might benefit from increased 4G and 5G network infrastructure rollouts by Jio and Airtel.
  • Digital Content Providers:
    • Increased data usage due to Cricket World Cup might benefit streaming platforms like Hotstar and JioCinema.
    • Online gaming companies could also see a boost due to higher engagement on mobile networks.

Indian Companies Potentially Losing:

  • Vodafone Idea (Vi):
    • Stagnant mobile revenue due to continued customer losses to Jio and Airtel.
    • Lagging behind in 5G rollout due to financial constraints, potentially putting them at a disadvantage.
    • Lower ARPU compared to competitors might limit revenue growth potential.
  • Mobile Phone Manufacturers:
    • Companies with a focus on budget smartphones might face pressure from Jio’s affordable Jio Bharat phone.
    • Manufacturers primarily catering to Vi customers might experience lower demand due to their subscriber losses.

Global Companies:

  • Global Telecom Equipment Providers:
    • Nokia, Ericsson, and Huawei might benefit from potential 5G network equipment contracts with Jio and Airtel.
    • Increased demand for smartphones and mobile data infrastructure could also benefit global tech companies like Apple, Samsung, and Qualcomm.
  • Global Media and Content Companies:
    • International streaming platforms like Netflix and Amazon Prime Video might see increased viewership in India due to rising data consumption.
    • Global gaming companies could also benefit from the expanding Indian mobile gaming market.

Please note: This analysis is based on the information provided in the given article and does not constitute financial advice. The actual impact on individual companies will depend on various factors, including their specific services, financial performance, and competitive landscape within the Indian telecom market.

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