Jio’s 7.3% sequential growth in ARPU to Rs 140.3 in the June quarter compared to Airtel’s 1.8% rise to Rs 157, they said, also helped lower the gap between the two companies on this score by 6 percentage points to 12%.
“Jio’s 7% on-quarter rise in ARPU during 1QFY21 and 12% on-quarter revenue growth was impressive and sharply ahead of Bharti Airtel,” Jefferies said in a note. The brokerage added that the telecom market leader also put in a stronger show on customer base expansion, recording 10.8 million net additions, while Airtel lost 3.8 million users in the fiscal first quarter.
Jio on Thursday had nearly trebled its net profit to Rs 2,520 crore in April-June period — its 11th profitable quarter in a row — helped by a combination of tariff increases, strong customer adds and lower finance costs after reducing debt.
Shares of Jio’s parent, Reliance Industries (RIL) were marginally down 1.8% in Friday afternoon trade on BSE.
Analysts said Jio’s strong customer adds were largely driven by its higher share of data subscribers, who could recharge digitally during the nationwide lockdowns coupled with its lower churn levels at 0.4%, especially as its tariffs remain at a 7-20% discount to Airtel’s even after the hikes taken last December by the Big 3 telcos.
Naval Seth, telecoms analyst at Emkay Global, said a key reason behind Jio’s stronger ARPU show is that it “primarily enjoyed the benefit of the December tariff hike in the June quarter as a larger proportion of its customers were on long-term plans, unlike Airtel, which saw actual material impact of the price hikes in the fiscal fourth quarter, FY20. Seth, in fact, expects Jio to further benefit from impact of the December tariff hikes in the coming quarters, and consolidate its revenue leadership in the market.
Jefferies backed the view, saying Jio’s ARPUs have risen by a cumulative 9% over the past two quarters, which is lower than Airtel’s 16% cumulative ARPU rise, indicating that the entire benefit of tariff hike may not still be reflecting in the Mukesh Ambani-led telco’s ARPU.
Credit Suisse said Jio’s stronger ARPU growth was also helped by subscription to add-on data packs amid increased data needs as majority of India Inc worked from home during the April-May lockdowns.
Goldman Sachs, in turn, said Jio’s 12% sequential growth in quarterly revenue was ahead of its expectations of 9%, and significantly stronger than Airtel, which reported a 0.6% dip in India wireless revenues.
The brokerage expects Jio’s subscriber (growth) momentum to stay robust, and sees its ARPU could stay at current levels without any tariff hikes, although it expects the next round of tariff hikes for the telecom sector to happen by the second-half of FY21.
Bharti Airtel’s CEO Gopal Vittal indicated on Thursday that the next round of tariff hikes may be round the corner, when he said prices need to move up if Airtel’s ARPU levels are to grow initially to the targeted Rs 200 level, and eventually to Rs 300 from Rs 157 to ensure meaningful capex spends.