Bharti Airtel recently announced that its ARPU ending Q4 20 increased to Rs 154 from Rs 123 in Q419! Exciting stuff! This pretty much reflects a hopeful future for the telcos, and the COVID-19 pandemic has only enhanced this outlook for the three incumbents. Even before the pandemic struck, we had started to see price hikes which came as a huge relief. But, the pandemic has the potential to completely transform the Indian telecoms ecosystem.
COVID-19 holds the potential to transform the telecoms industry.
Apparently, it takes 66 days to form a habit and through the lockdowns and social distancing, we have observed an unprecedented adoption of various kinds of tech in our lives to transition to this new normal (the e-commerce penetration in the US increased by 11% in the last 2 months! It took the past 10 years to observe a similar increase!). A lot of these new, digital habits will stick, leading to higher internet penetration and higher data usage per user, in turn further boosting the ARPU. Bharti Airtel’s mobile data and ARPU increase of 74.2% and 25% is a testament to this. But, it is also true that the economy globally is badly hit by the pandemic. This will have negative effects as well: further price hikes may not happen in the near future and the onset of 5G in India will be delayed (this will be good news to the incumbents!).
As the battlefield evolves, the incumbents are fighting different battles.
Reliance Jio brought a much needed (or not so needed? Depends on the perspective!) revolution to the Indian telecoms sector. We have seen a tremendous increase in data speeds and massive price decreases per GB (from 250 INR to 13 INR!). Now that Jio has gained leadership in the market, it is determined to achieve convergence: convergence across the different facets of consumers' lives! Jio Platforms are picking up pace – just look at the number of investments in the past month! Reliance Jio looks to be in a commanding position with a deep pocket to continually invest in its network and bring a suite of services around e-commerce, content, broadband, TV services, etc. Not a long time from now, we will see a customer’s needs being fulfilled end to end by Jio Platforms and that provides the company with one of the biggest competitive advantages – customer captivity!
Bharti Airtel has always been focused on up-keeping the confidence and trust that the Indian customer has on its service, through the Jio revolution (storm?). Even before Jio, it had been a pioneer in introducing new services and features for its customers, something that other telcos were afraid to do so as to not hamper their revenues. The company has always strived to be (and has been) at the forefront of quality, investing heavily on its networks. The newly announced 7500 crore INR deal with Nokia to deploy 5G networks shows that it wishes to maintain that supremacy (what a deal for Nokia, by the way!). Airtel seems to be in a great position to benefit highly from the behavioural changes of customers through the pandemic, and it should expect good times in the near future, with its African entity faring well, too.
Vodafone Idea has been in the news for all the wrong reasons in the past year. It has battled hard to escape bankruptcy and has managed to keep afloat through a challenging period. For now, the company’s strategy should be to achieve incremental wins through a consistently improving top and bottom line (I know this is tough!) and innovate to differentiate itself amongst an ocean of offerings available (the REDX plan was a good move!). The network integration has been going on for a long time now, but the company has finally started to see a consistent benefit out of it (the company is on track to complete the integration process by June 2020). However, it has lost customers at a breakneck pace and slowing or stopping the churn should be the priority. As the industry stabilises, Vodafone Idea needs to attain a stable position too. The merger of Vodafone Idea has taken a long time to materialize with cultural conflicts and complex integration. The company would still have elements of those complexities in its ecosystem and as it continues to build the right momentum, it should also focus on getting operationally efficient, leaner and simpler, and agile to customers’ dynamic demands so as to realize value out of a growing market.
With unprecedented growth in the adoption of internet and tech, India is an ocean of opportunities.
The internet penetration in India is 40% with the penetration in top metros at 65%. There is substantial headway for all the three incumbents to onboard the new wave of customers who will come online in India (I believe a higher proportion will be from lower-tier cities and rural areas) and continue their individual growth trajectory (even a 20pp increase in internet penetration yields 250 new million customers!). It is unlikely that price wars will happen in the near future, considering that Jio is the biggest operator now and it will hurt itself the most if it initiates any price decrease.
A bigger chunk of the world got to know a few days back that 17th May is celebrated as World Telecommunications and Information Society Day. Almost all of us have been hugely reliant on our mobiles and networks to seamlessly shift our lives amidst such a turbulent period and telcos have done a great job in helping the world make this shift. I believe that this will definitely improve the customer sentiment towards the operators and enable operators to take a stronger position in building the new digital society post-pandemic. The three incumbents are going to be definite beneficiaries to this change and there is going to be enough demand for Jio, Airtel, and Vodafone Idea to achieve a more sustainable growth period in the future, winning their individual battles.
