In Q42020, Airtel’s mobile revenue growth outstripped Jio’s by a huge margin (quarter on quarter increase of 15%, 2X Jio) as the company saw an increase in ARPU from Rs 135 in Q32020 to Rs 154 in Q42020. This revenue and ARPU growth are despite the ~30 million customers not recharging due to the adverse effects of the coronavirus pandemic. Airtel has consistently maintained its subscriber market share (Airtel – 26% in Q32019 vs. 26% in Q32020, Vodafone Idea – 36% in Q32019 vs. 28% in Q32020) in the past many quarters with a continued investment focus on networks and its digital ecosystem, which we believe has enabled the company to capture a stronger position in the growing telecommunications market. Looking at the future, we are bullish at Airtel’s ability to grow its revenue market share by capturing customer base from its competitors, upgrading its 2G/3G base to 4G layer, and leveraging its arsenal of digital services that continue to get better in terms of the end-user experience.
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Making strides to leverage growth opportunities and gain market share.
Airtel has been strategically strengthening its networks PAN India as it focuses on firming its 4G presence in weaker circles so as to upgrade its 2G customer base and capture the market share from other incumbents, primarily Vodafone Idea. Even after the tariff hike, the company added 33 million 4G subscribers in the second half of FY20, with 40% of those additions in Q4 alone. However, there is still a huge runway for further growth with less than half of its customers using 4G – a major possible driver for ARPU increase in the near future. With respect to networks, Airtel is building on its presence in weaker circles as it spent almost half of its entire FY20 budget in the last quarter alone.
The company’s continuous investments in networks are evident its consistently stable market share in the past quarters, and with growing momentum in 4G subs addition further augmented by the pandemic, Airtel seems to be in a strong position to increase its market share in a growing market pie as people unprecedentedly embrace digital ways of going about things.
Tapping into the Digital India revolution.
In the Q4 earnings call, the company management communicated their confidence around the growing revenues arising from Airtel’s digital arsenal such as Airtel Thanks and Xstream (not to forget Airtel Mitra that has ~1 million retailers transacting on the app!). The company has been investing significantly to build a talented team around its digital services and we believe that the efforts have started paying off. Airtel will start benefiting tremendously from these multiple growth levers in enterprises and digital business. We saw Jio raise a series of capital for its high growth rate in digital platforms and Airtel may capitalize on a similar opportunity in the future as it continues to expand its services in payments, streaming, and content, and enterprise, and home broadband.
Additionally, the company has been observing a significant upsurge in its fixed broadband sales (60,000 new subs added in Q42020 vs. only 2,000 in Q32020!) due to such a wide-scale adoption of work and education from home in India. To meet this demand surge, Airtel has partnered with a number of local service providers on a revenue-sharing model to increase the reach of its services to eight more cities in Q42020. As per the management, the company continues to observe a growing demand even after Q4, which is definitely good news for its home broadband services that were seeing a revenue decline Q-o-Q in 2019.
Recovering from the short-term dislodgment & adding momentum to an improving story
We mentioned that as many as 30 million Airtel customers could not recharge due to the pandemic as the telecom operators struggled to add new customers due to disruption in the value chain. However, the increased usage has driven the growth prospects for the operators in these challenging times and Airtel has definitely emerged as the biggest winner. The company has been able to build momentum in its journey providing a consistent and superior experience to its customers and the COVID-19 pandemic has definitely augmented that momentum. Airtel is making all the right moves as it establishes a firmer ground in the Indian telecoms space, and it is set to benefit considerably from its past and current investments across the array of its services.
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