On the call, the telecom company’s CEO highlighted Airtel’s 5G trials, defended daily data limits, and hoped that the government would provide some relief to the industry.
- Airtel’s India revenues stood at Rs 18,828 crore in Q1 FY 2022, up 19.2% Year over Year without counting the impact of the Interconnect Usage Charge.
- On the same basis, India’s mobile revenues were up 21.9% YoY and stood at Rs 14,305 crore.
- Monthly data consumption per user is up by 13.7% to 18.5GB.
- In the absence of price hikes for prepaid users, the Average Revenue Per User has only grown from Rs 138 to Rs 146 YoY.
- Consolidated net income stood at Rs 266 crore, compared to a loss of Rs 430 crore in the same quarter in the last year.
Why it matters? Even as Airtel continues posting increasingly promising profits, the risk of the telecom market becoming a duopoly looms high. There is talk of financial stress at Vodafone Idea; the Economic Times for instance has reported on executives trying to assuage employees and investors on these concerns, but there remains no capital infusion insight. Even Airtel is worried (see below) about the state of the telecom market with just two private players; that is in spite of the fact that Airtel’s numbers appear to be recovering quite nicely since the disruptive entry of Reliance Jio.
Earnings call takeaways
Here are some highlights from the CEO of Bharti Airtel (India) and South Asia Gopal Vittal during the earnings call for the quarter.
- Family postpaid plans create barriers to leaving: Airtel is focusing on high-value households and keeping them tied to the company through postpaid plans that are not easy to leave, Vittal said. “The post-paid family plan has a powerful network effect and creates barriers to exit. Almost 61 percent of our postpaid customers are now on the family plan with negligible churn,” Vittal said. Churn is the rate at which customers leave a service.
- 30 of 50 high-value homes covered: “There are potentially 50 odd million high-value homes in India. They comprise of executives, self-employed professionals, businessmen and the like,” Vittal said. “The most exciting thing for us is that close to 30 million of the 50 million high-value homes are already on our network, either with the post-paid, DTH, or broadband connections. So this opportunity is really ours to tap into.”
- 5G trials on in multiple cities: While 5G spectrum is yet to be sold, Airtel has started testing the technology. “We’ve built a network that’s fully ready for 5G. It’s a capability we’ve already demonstrated by conducting India’s first 5G demo over a live network and are now conducting trials in multiple cities. We’ve made substantial investments in our transport layer over the last five years to be ready to deploy 5G when needed,” Vittal said.
- Need 3 players in the market: “I do feel that as a country, we do need three players. I mean, this is a large enough country with 1.3 billion people that can easily accommodate three players in this market,” Vittal said. “So there is clearly a situation of a serious financial stress in the industry. And, you know, we’ve seen one of the players actually saying to the government that they may not be able to pay the [AGR] dues coming up in March 2022. We hope that, you know, the government does something to actually provide some relief to the industry. But even more important, I think if ARPU can go up, then the industry’s repair can certainly happen.”
- 2G, corporate price hikes tested first: Responding to a question on why Airtel waited so long before hiking 2G and enterprise postpaid plans, Vittal responded, “We had tested this [change] for some period of time in Andhra Pradesh and UP West. The reason we picked those two markets is that one is a strong market and the second is a relatively weak market. And once we found the results satisfactory, we went ahead and did it [nationally],” Vittal said. On unilaterally hiking prices for prepaid retail users, Vittal said it might cause “a switch away of perhaps some more price elastic customers. And I think, therefore, we need to be a little bit more careful about that.”
- Device ecosystem: Vittal said Airtel would try to compete on the handset market, but said that the company didn’t want to get into having phones in its inventory. “We’re working with both OEM manufacturers, with Google, as well as with software developers to see how we play this game in the smartest way without taking inventory positions, without manufacturing our own device while still playing with the ecosystem at large. But yet being competitive, I’m not able to share a lot more texture and detail on this because some of this is still being worked through and it’s still unclear,” Vittal explained.
- In defence of daily plans: “I do believe it’s the right way forward because the current model of a daily quota of GBs where people are still not using their full quota and therefore consumption is going up without a necessarily commensurate increase in ARPU,” Vittal said with regard to daily data limits. Essentially, daily data limits allow telcos to sell more data than what customers end up using, as a fixed portion of the allowance expires every day instead of being carried forward.
Quotes are slightly edited for clarity.
- Vodafone Idea Says No Need For Plan B In Case Funding Falls Through
- Vodafone Idea Users Consumed 48.5 Million TB Of Data In Q4FY21, Net Loss At Rs 6,985 Crore
- Vodafone Idea: Incentives For Fixed Line Connectivity Should Be Extended To Wireless Connectivity Too
- Vodafone Idea ARPU Increases Slightly To Rs 121 In Q3FY21, Data Use At 12.3GB Per User
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