The customer churn to BSNL observed in the wake of the July 2024 tariff hikes by the top 3 telcos has significantly slowed down, IIFL Securities said in its report on December 6. The broking and investment firm's team gathered insights after visiting to a few stores across villages and small towns in the Vidarbha region of Maharashtra. Most subscribers have absorbed the tariff hikes without downtrading, and any future hike could still be absorbed. However, such increases could potentially impact spending on other consumer items, the report noted.
Also Read: From Tariff Revisions to Subscriber Dips: A Chronological Review
Decline in Churn to BSNL
The report highlighted that the shift to BSNL, which had initially gained traction after the July 2024 tariff hikes, has slowed down considerably. BSNL, which did not raise prices, had attracted customers with its Rs 199 plan offering 2GB of daily data for 28 days—a 43 percent discount compared to Jio's Rs 349 plan and a 47 percent discount compared to Bharti's Rs 379 plan.
The churn to BSNL has significantly slowed down recently due to its network quality issues. Some retailers even called out customers porting back to Jio and Bharti, the report said.
Channel Payouts
IIFL also observed a reduction in channel payouts. During their third-quarter FY24 rural visit, retailers reported that telcos were paying Rs 250-280 per port-in, a decrease from over Rs 300 previously. In their current visit, these payouts were further reduced to Rs 200-210 per port-in, provided retailers achieved more than 50 port-ins. Jio offers a 3-4 percent commission on top-ups, higher than Bharti and Vodafone Idea's (Vi) 2.5-3 percent, while BSNL provides the lowest commissions. Jio's sales and distribution (S&D) expenses as a percentage of revenue have increased by 90 basis points (bps), while Bharti India's S&D expenses have decreased by 50 bps and Vi's have dropped by 180 bps.
Also Read: BSNL Not Considering Tariff Hike Anytime Soon, CMD Says: Report
Spending Capacity Concerns
The report warned that another tariff hike could impact spending capacity, particularly among rural and lower-income users, many of whom already consider the Rs 299 plan (28 days) unaffordable. Further hikes could lead to reduced spending on other essentials, potentially affecting rural consumption.
IIFL Survey
IIFL said it has also conducted a survey in the interior parts of Maharashtra, focusing on small villages, towns, and semi-urban areas in the Vidarbha region. According to the report, most retailers said that, initially, many customers switched to BSNL after the tariff hike. However, this trend has significantly slowed down now. The customers shifting to BSNL are primarily from the lower-income segment and small villages.
Network Quality
Most retailers reported that Jio and Bharti offer the best network quality, followed by Vi. BSNL apparently has the weakest network. Both Jio and Bharti offer 5G services in Malkapur, Malkapur Rural, and Jambuldhaba, while 4G services are available in all the areas, the report said.
In Zodga, users stated that Bharti’s network has significantly improved in recent months and is now superior to others. Meanwhile, both Jio and Vi experience occasional network drops, while BSNL barely works. In Jambuldhaba, Jio is regarded as the best network, followed by Airtel.
Demand for Jio Bharat Phone
The research revealed that users of the Jio Phone and Jio Bharat Phone felt that the Rs 91 and Rs 125 plans were affordable. According to the report, the Jio Bharat Phone has decent demand but is facing supply constraints.
"The original Jio Phone offer required customers to pay a Rs 1,500 security deposit, use the handset for 3 years, and then return it to the retailer to get a refund of the deposit. However, all retailers surveyed reported that customers have not returned the handsets after 3 years, with one retailer mentioning that even the company did not take the phones back. Despite the production of the original Jio Phone being discontinued, it remains in demand among consumers," the report said.
Jio Phone Next was discontinued by the company due to lack of market demand. Reportedly, the Jio Bharat Phone is popular in the lower-income segment, though it does not have the same level of demand as the original Jio Phone.
Best-Selling Plans
The most popular plan for Jio users is the Rs 299 plan, offering 1.5GB of data per day for 28 days. Jio 5G users typically opt for the Rs 349 plan, which provides 2GB of data per day for 28 days along with unlimited 5G data, according to the report.
For Bharti, the Rs 299 plan (1GB/day) is the most popular, though some retailers also highlighted the Rs 349 plan, which offers 1.5GB/day for 28 days and unlimited 5G data.
Vi's most common plan is also the Rs 299 plan (1GB/day). BSNL's most popular plan is the Rs 199 plan, offering 2GB of data per day.
Also Read: Airtel, Vodafone Idea and Reliance Jio in Q2FY25: A Snapshot of ARPU and Subscribers
Vi's Prompt Dealer Payouts
According to the survey, Vi has been prompt in making dealer payouts. Specifically, in a survey conducted at a Vi shop in Malkapur, the retailer stated that Vi has been prompt in paying commissions for top-ups, SIM activations, and port-ins. The retailer expressed confidence in the government's support for Vi and its continued survival.
According to the report, "A Vi shop in Malkapur mentioned that Vi offers unlimited data between 12 AM and 6 AM for customers who port to Vi, though this offer is not available to customers who take a new SIM." The report referred to the banner outside the shop.
Other Consumer Insights
The report revealed that most surveyed users still rely on 4G phones, though new smartphone buyers have increasingly upgraded to 5G handsets. Data consumption primarily occurs on YouTube and social media. For users who have access to Wi-Fi, 1.5GB of daily mobile data is sufficient. However, for those who rely solely on mobile connections, 1.5GB/day is often insufficient, the survey revealed.
