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Ever since Reliance Jio Infocomm Ltd started reporting its financial results, it has beaten its competitors hands down both in terms of subscriber and revenue growth. But this changed in fiscal 2021. “Fiscal 2021 belonged to Bharti Airtel Ltd," said an analyst at a domestic institutional brokerage.

While apples-to-apples numbers are difficult to come by, since Jio’s numbers now include its fixed broadband business, it’s clear as daylight that Airtel trumped Jio on subscriber growth in the wireless business last year.

On a reported basis, its net subscriber additions of 37.7 million are almost identical to that of Jio. But the latter’s tally includes net additions of around 1.75 million in its fixed broadband business. In percentage terms, the growth differential is greater simply because Airtel operates on a much lower base. But in the last two months, momentum has shifted to the side of Reliance Jio. Back-of-the-envelope calculations suggest it added around 9 million wireless subscribers in the month of March, compared to just 2 million in January. For Airtel, the trend has been exactly the reverse. It added around 4 million subscribers in March, down from 6 million in January.

The relaunch of the JioPhone earlier this year has helped Reliance Jio catch up with regards to subscriber growth, and its momentum is expected to continue, what with the launch of a low-cost smartphone also on the anvil.

Role reversal
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Role reversal

But that isn’t the only worry for Airtel. Its March quarter results suggest a higher than expected pressure on realizations and profit margins. The average revenue per user fell 0.7% on an adjusted basis last quarter, despite a continued sharp rise in the proportion of higher-value data subscribers.

Ebitda margins of the India mobile business were also lower sequentially. Ebitda stands for earnings before interest, tax, depreciation and amortization. Last quarter’s results included the impact of the termination of interconnect charges. While this caused a drop of around 5% in revenues, Ebitda was expected to rise a bit, as it was understood that Airtel was a net payer of interconnect charges. Analysts say one reason for the drop in margins, besides the lower-than-expected Arpu, is a sharp spike in network operating expenses. “Network costs increased sharply quarter-on-quarter by 6.7%, on the back of one of the highest-ever tower adds of 8,300 and an over 10% sequential increase in diesel costs," said analysts at Dolat Capital Research.

The fact that both Arpu and Ebitda margin fell against expectations of a rise is likely to dampen investor sentiment a bit. The good news is that some other segments performed well. Airtel Africa continues to impress with strong revenue and profit growth. In constant currency terms, Africa revenues and Ebitda rose 22% and 32%, respectively, year-on-year. And the fixed home broadband business bounced back with strong profit growth, almost fully negating the impact of the drop in tariffs last year. Ebitda of the business is up 11% on a year-on-year basis. Of course, in the mainstay wireless business, while Jio has caught up on the growth front, Airtel’s growth in the March quarter is nothing to sneeze at. It continues to garner share from Vodafone Idea, and this trend is expected to continue. But Jio’s recent tariff actions, including free minutes offered to a category of users, suggests that investors’ wait for tariff hikes will continue for some more time. Airtel shares are about 10% lower compared to its highs in February.

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