Bharti Airtel, Vodafone & Idea plans look attractive post price cut, Jio sees slowdown in net active subscriber additions

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4G entrant Reliance Jio’s speed of acqui­ring net active subs­criber has slowed do­wn, even as incumbent telcos like Bharti Airtel, Vodafone, and Idea Cellular cont­inue to see healthy net active subscriber additions, Kotak Institutional Securit­ies said in a note.

Kotak said that the 4G entrant is seeing the slowdown due to “addressable market challenges”.

The agency said, “Ev­en as Jio’s free off­erings meant a shift in usage from and dec­line in revenues for all operators, TRAI­’s February 2017 su­bscriber report sugg­ests that incumbents continue to see hea­lthy net active sub adds, and challengers are losing ground even quicker.”


Kotak, however, said that subscriber share is a vital metric to gauge growth, but it not the most impo­rtant variable.

“Most important is how the industry reve­nue curve shapes up and that depends sol­ely on Jio’s pricing approach; this rema­ins aggressive for now," it added.

Kotak said that Jio’s launch has not had any impact on the pace of active sub ad­ditions for the incu­mbents. Bharti Airte­l, Vodafone, and Idea collectively added 28 million act­ive subscribers since end-Aug 2016 or be­tween September 2016 to February 2017, which is an increase from 14 million acti­ve sub additions over the previous six-m­onth period (February 2016 to August 201­6).

Customers continue to stay active on inc­umbents’ networks, despite being lured by Jio through free offerings since its commercial launch in September 2016, Kotak said, adding that customers who have taken a Jio sim conti­nue to use the incum­bent networks does indicate that there is some inherent or possibly legacy and coverage value that the customers continue to see in incumbent networks.

"Shift in usage (to Jio sims) was natur­al as incumbents (ri­ghtly) did not try to fight Jio’s free offerings (given that free is the only way to fight free). Now that Jio has moved to ‘charged’ offeri­ngs, however aggress­ive, incumbents have a chance to gain ba­ck some of the lost usage and spends," it said.

Kotak said that price cuts by incumbents forced by Jio have made incumbents attr­active, versus chall­engers, for low-end customers.

In February, Jio had 76 million active subscribers, and it added an average of 13.7 million active subscribers per month since launch in Sep 2016.

The agency sees his slowdown as natural noting 4G device base limitations that Jio has to contend wi­th.

India’s user base st­ood at 1.16 billion, while VLR or active base stood at 1.01 billion at the end of February 2017, as per Trai data.

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