Bharti Airtel’s decision to focus on reducing price points of smartphones and not bring in its own VoLTE feature phone to take on Reliance Industries’ JioPhone appears to be hurting it.
Analysts said the Sunil Mittal-led telco has been unable to effectively counter JioPhone, which has resulted in Airtel losing millions of subscribers — especially those on its 2G network using feature phones — that experts attribute in part to the high uptake of Jio’s 4G feature phone, which runs on the Reliance Jio network. “Airtel is unable to deal with JioPhone’s pricing challenge as it does not have similar subsidised 4G VoLTE feature phones on offer, and it’s unlikely to engage in any aggressive customer acquisition strategy involving doling out of handset subsidies before having a comparable 4G network like Jio’s,” Naveen Kulkarni, head of research at Reliance Securities, told ET.
Analysts said it is easier-saidthan-done for Airtel — facing pressure on revenue and profitability — to subsidise handsets as they need to conserve cash to first augment 4G network capacity and catch up with Jio, which currently has a disproportionate share of data traffic flowing on 4G networks. No wonder, Bharti Airtel has steadfastly refused to toe the Jio line, despite being stung by the huge popularity of RIL’s recent Monsoon Hungama offer which allows exchanging any ordinary feature phone for a 4G JioPhone at just over Rs 1,000 (including six months recharge). The erstwhile telecom market leader lost as many as 6.6 million subscribers in the September quarter, while Reliance Jio, reported a 37 million customer additions during the period.
Goldman Sachs attributed the phenomenon to “loss of (Airtel) subscribers to JioPhone” and “rationalisation of customers” gained, postacquisition of erstwhile Telenor India.
“We estimate 15-20 million JioPhones were sold in the second quarter FY19, and if JioPhone traction remains strong, we could continue seeing pressure on Bharti’s revenues,” the brokerage said.
But Airtel’s CEO Gopal Vittal was unfazed. “We have chosen not to compete in the VoLTE feature phone segment as we have feature phone users on our own network, and plan to get them to directly upgrade to smartphones,” Vittal said on an earnings call after the September quarter results.
Last week, Airtel rolled out Rs 2,000 cashbacks for users upgrading to any 4G smartphone in clear bid to stop feature phone customer losses.
Over the past one year, it has expanded its tie-ups with handset vendors to launch affordable 4G smartphones under its’Mera Pehla 4G smartphone’ drive to counter JioPhone’s threat.
It is also trying to push more and more of its feature phone user base to 4G.
Analysts though are sceptical of Airtel’s chances of migrating its feature phone user base to 4G smartphones amid the huge uptake of the subsidised JioPhone. Ordinary 2G device users, they said, have always been wary of shifting to smartphones due to the affordability factor but the advent of JioPhone has changed all that as it’s the cheapest device in the market for price-conscious 2G users to experience 4G data and video along with VoLTE-grade voice services.Rohan Dhamija, partner and head of India & Middle East at Analysys Mason, said that Jio’s decision to subsidise its 4G feature phone has “sharply reduced the upfront cost of 4G devices in a much more significant way than the cashbacks being offered by Airtel” to egg feature phone users to go 4G.
Airtel’s Vittal admitted that the move from featurephones to lowcost smartphones is still some time away.