‘Jio opts for competitive rates, Airtel takes premium road to drive ARPU’

India’s top two telecom operators — Reliance Jio and Bharti Airtel — are taking aggressive yet divergent strategies for growth, even as competition to acquire customers and increase consumption by them intensifies in the sector, analysts said.

While both are eyeing cash-strapped Vodafone Idea’s customers in urban and rural areas, Airtel is taking the premiumisation route to push average revenue per user (ARPU) higher. Jio seems to have gone back to its strategy to expand its user base with competitive pricing, especially in the entry-level segments, they added.

“Unlike Bharti’s clear premiumisation strategy, Jio also remains focused on further expanding its subscriber base,” Citi analysts observed after Jio announced the launch of the Jio Bharat phone.

In both cases, the strategies serve dual purposes, analysts said.

“Both Airtel and Jio are looking to fill the white spaces in their coverage and protect areas where they have a stronghold. So, Airtel is looking to improve its 4G coverage in the rural areas while protecting its post-paid base, and Jio is trying to expand its post-paid base and at the same time making sure it does not lose out on its significant entry-level user base,” said an analyst with a leading brokerage.

Earlier this year, Jio made an aggressive play for the post-paid market by introducing competitively priced plans with family usage features and value-added benefits like subscription to over-the-top streaming services. Jio’s current post-paid user base is estimated under 3% of its total user base.

More recently, the telco launched the Jio Bharat phone with the intention to corner a chunk of the 250 million 2G user market base.

“Jio’s new feature phone is also expected to help it retain the JioPhone user base that is at the end of the usage cycle, since the Rs 999 price is attractive for entry-level users looking for a new phone, and competitively priced tariffs while also upgrading them to 4G,” said another analyst who did not want to be named.

The Jio Bharat phone targets 2G users who can be ‘upgraded’ to 4G given the feature phone comes with 4G capability — Jio doesn’t offer 2G services.

However, Jio’s latest strategy with the Jio Bharat phone could have a negative impact on ARPUs.

“Subscriber gains driven by JioBharat are largely in consensus but would be dilutive to blended ARPU,” analysts from Macquarie said.

The new phone is clearly targeted towards semi-urban and rural areas, as suggested by its retail trials that are currently underway. Airtel too has maintained rural as part of its growth strategy, though chief executive Gopal Vittal said earlier that here too, the telco is looking to upgrade 2G users to 4G by increasing its 4G radios and base stations in these regions.

Airtel will also aggressively look to expand its premium user base and try and increase the ticket size of this base through bundling and value-added services, analysts said.

The increased competition in the market leaves Vodafone Idea further struggling to protect its market share in both rural and urban markets in the absence of a significant fund raising.

Vi’s chief executive Akshaya Moondra has stated previously that its 5G rollout plans were dependent on raising funds. With Airtel and Jio going all guns blazing to propel their user base and ARPU numbers, Vi is vulnerable to market share losses as it struggles to invest in its network expansion.

For example, while Airtel has completed undertaking entry-level tariff hikes in all 22 circles (from Rs 99 to Rs 155) and is unlikely to roll them back even after Jio’s aggressive play for the entry level market with the Jio Bharat phone, Vodafone Idea may have to put the brakes on a similar activity it is currently undertaking.

Non-data subscribers account for around 40% of Vi’s paying subs and contribute around 15-20% to its wireless revenue, as per estimates. Vi had recently reduced validity on its Rs 99 minimum recharge pack from 28 days to 15 days in three circles: Mumbai, Gujarat and Delhi.

“We expect Vi to now take a more calibrated approach on further hikes at lower end,” analysts from Kotak Institutional Equities observed.

Airtel, Vodafone Idea and Jio did not respond to ET’s queries till press time Monday.