Airtel widens Arpu gap with Jio, buoyed by premium customers, improved service

Bharti Airtel, India’s second-largest telecom operator by market share, pulled further ahead of its larger peer Reliance Jio in what it earns from each customer during the September quarter, buoyed by premium customers joining its network and a steady focus on better service quality.

Airtel, which has an industry-leading average revenue per user (Arpu) of ₹256 per month, saw a 2.4% sequential increase compared to Jio’s 1.2% growth, which took its Arpu to ₹211.4 at the end of September quarter. Arpu is an important measure for telecom companies, showing the average revenue they get from each user—the higher it is, the stronger the business.

On Monday, the Sunil Bharti Mittal-led telecom operator reported its September-quarter results. The company reported strong earnings driven by a surge in mobile data consumption, an expanding subscriber base and a recovery in the enterprise segment—Airtel Business—after three quarters of a fall in revenue. Airtel Business, which houses the enterprise connectivity solutions including data centres, cloud and internet of things (IoT) solutions, saw a sequential rise after three straight quarters of decline as the company exited the low-margin wholesale commodity voice and messaging business.

Bharti Airtel reported a revenue of ₹52,145 crore in the September quarter, rising 25.7% from the previous year, and 5.4% from the preceding quarter’s ₹49,463 crore, according to the company’s earnings release. The company’s revenue was largely driven by an increase in its mainstay mobile services business, with a focus on premium services and growth in Airtel Africa.

“It seems that Jio is going after the mass market more, whereas Airtel right from the start talked about its focus on the premium customers, largely. Given Jio’s focus on market share, it seems difficult that it will look to be aggressive in closing the gap on Arpu,” said Faisal Kawoosa, chief analyst at Techarc. According to Kawoosa, removal of the entry-level data plan by operators could also have led to an increase in Arpu for Airtel during the quarter.

Net profit rose 89% from a year earlier to ₹6,792 crore, helped by lower losses at its associate and joint ventures during the quarter. A lower finance cost also improved the profit during the quarter. On a sequential basis, Airtel’s net profit rose 14.19% from ₹5,948 crore in the preceding quarter.

A stable quarter for Airtel comes at a time when the Supreme Court permitted the government to provide relief to Vodafone Idea on the additional adjusted gross revenue (AGR) dues for the period up to 2016-17.

Investors are expected to track Airtel’s stance on tariff hike on Tuesday during the call with analysts, especially when Jio has ruled out any immediate plans to increase tariffs.

Further, any guidance on whether Airtel would push for its case for AGR relief will be key. Earlier, Airtel had also urged the government to convert some of its AGR dues into equity.

“India mobile business delivered 2.6% revenue growth, adding 5.1 million smartphone customers, maintaining an industry-leading Arpu of ₹256 led by continued premiumization of portfolio and a steadfast focus on quality customers,” Gopal Vittal, Bharti Airtel vice-chairman and managing director, said in the earnings statement. Vittal added that the postpaid segment recorded one of the highest quarterly net additions of 1 million. As of September-end, the company has 27.5 million postpaid users.

“We believe change in tariff structure is critical to grow Arpu sustainably, without hurting base plans while being able to play the rising income levels for Arpu expansion. The tweaking in the 5G tariff structure, and push for 5G adoption shall help premiumization to continue for longer,” said analysts at ICICI Securities in a note dated 24 October.

At ₹28,116.7 crore, India mobile services business contributes 54% to total revenue of Bharti Airtel. Notably, Airtel Business saw a sequential rise after three quarters of continuous revenue fall.

“Airtel Business reported strong results with 4.3% sequential revenue growth. We saw multiple deal wins across connectivity, IoT (Internet of things) and security business,” Vittal said. During the quarter, Airtel reported a ₹5,276 crore from the business segment. This was, however, 6.7% lower on a year-on-year basis.

“Enterprise’s business appeal is growing with the adoption of digital services such as cloud, cybersecurity, CPaaS (communication platform-as-a-service) and IoT; telcos are also participating in the data centre business, and large untapped managed services in MSME segment and deployment of AI applications,” analysts at ICICI Securities said.

While Kawoosa also sees an upside for telecom operators from the data centre and cloud business, he said that for artificial intelligence offerings, operators are not thinking beyond distribution. “Maybe in the short term, they will be able to win market share by distributing generative AI models for consumers and enterprises, for the long term, they will have to create a value proposition,” he said.

Three months after Airtel offered its subscribers Perplexity, Reliance Intelligence on 30 October announced its tie-up with Google to offer Jio users the latest version of Google Gemini AI Pro worth ₹35,000 free of cost for 18 months.

To be sure, Airtel added 1.4 million mobile users in the September quarter, higher than 1.2 million mobile subscribers it added in the June quarter. As of September-end, the company’s total mobile subscriber base in the country was at 364 million, compared to Jio’s 506 million.

Homes business, which includes home wi-fi, broadband and TV connectivity, saw revenue rising by 30% on-year to ₹1,865 crore. “Our Homes business sustained strong momentum with 951,000 net customer additions and sequential revenue growth of 8.5%. IPTV services continue to gain strong traction, driving our connected homes priority,” Vittal said.

The company’s digital TV business witnessed a marginal dip with revenue at ₹753 crore during the quarter.

Africa market

For Airtel, the Africa market accounts for about 26% of its consolidated revenue. In the September quarter, the revenue of Airtel Africa rose 24.2% year-on-year to $1.6 billion in constant currency terms on the back of increase in data usage and Airtel Money expansion in the region.

Last year, Jio Platforms, through its subsidiary Radisys, announced its foray into the Africa market to provide network infrastructure in Ghana, and not as a telecom service provider.

Radisys announced a partnership with Next-Gen Infra Co. (NGIC) to establish shared 4G and 5G fixed broadband network infrastructure in Ghana.

The partnership also involves digital infrastructure provider Ascend Digital, Finnish tech and telecom firm Nokia, Swedish telecom firm Ericsson and IT services major Tech Mahindra to roll out 5G infrastructure across Africa.