Airtel to continue strong revenue growth from 5G, Vodafone Idea to continue losses: Analysts

Bharti Airtel will be see strong revenue growth, driven by its over exposure to high end customers and a better 5G strategy, according to an analyst report.

“The revenue growth in the Indian mobile market continues to accelerate for Bharti and has now reached 25% driven by improved market share performance, better pricing on a like for like basis and migration from 2G to 4G. 5G is likely to see further upside to both Bharti’s market share and ARPU and therefore continued strong revenue growth,” the report by NewStreet Research said.

The 5G launch suggests the next round of average revenue per user (ARPU) upside is close, which coupled with 2G to 4G migration means that the core is set to continue to grow at double digit rates, the report said.

Vodafone Idea is likely to lose top end subscribers and it requires another price increase if it has to survive. “If prices don’t rise, it’s a 2-player market,” it said.

Airtel announced the launch of 5G Plus services in 8 cities, while Jio has announced launch of beta 5G services in 4 cities. Vodafone Idea is yet to announce any date of 5G launch.

Another report from UBS says Jio and Bharti have adopted divergent 5G strategies with Jio opting for pan-India SA rollout leveraging its 700MHz footprint whereas Airtel plans to take a more “evolutionary” approach with NSA initially.

“Looking at global examples, we do not expect these divergent strategies to lead to material change in competitive dynamics in the next 1-2 years. While SA networks provide ‘full 5G experience’, they lack backward compatibility with 4G which could impact voice quality. Also, while SA features such as network slicing, edge computing etc. cannot be fully offered in NSA, use cases for these are limited even in mature markets such as US and China,” UBS report said.

Given the global experience on 5G adoption and the fact that killer-apps are still lacking for 5G, Jio’s strategy of going for a completely new 5G SA network will likely have limited advantage in the next 12-24 months. Over the long-term, and depending on how enterprise use cases for 5G evolve, Jio’s SA network could offer an advantage, although Airtel (like most other telcos globally) will also eventually migrate from NSA to SA and Airtel has the option to acquire 700MHz spectrum in the future if it turns out to be a game-changer for Jio, the report said.