So far this month, Bharti Airtel shares have slumped 21 per cent in comparison to a 3.5 per cent fall in S&P BSE Sensex.
Telecom companies such as Bharti Airtel and Vodafone Idea shares plunged up to 9 per cent in Wednesday’s trade after the rival Reliance Jio renewed its postpaid game plan with the launch of new plans. Under the new plans, Jio is offering an extensive content portfolio at a rate which is 6-20 per cent cheaper than Airtel and Voda-Idea. Analysts at Emkay Global Financial Services in the recent report noted that in the past, Jio has tried to capture the post-paid market with aggressive pricing while consumer stickiness and a lack of content offerings prevented it from achieving any notable gains. It believes that this time extremely aggressive content offerings (Netflix, Amazon prime, Disney+Hotsar VIP) could be the key attraction for consumers. Bharti Airtel is the worst-performing stock on Sensex today.
Reliance Jio’s base plan at a 20% discount to Bharti Airtel
So far this month, Bharti Airtel shares have slumped 21 per cent in comparison to a 3.5 per cent fall in S&P BSE Sensex. Reliance Jio has unveiled five new JioPostPaid plus plans starting at Rs 399 which will go up to Rs 1,499. Under the Rs 399 plan users will get 75 GB data, unlimited voice and SMS, Netflix, Amazon Prime and Disney+ Hotstar VIP subscription, and 200GB data rollover. Jio’s base plan of Rs 399 is at a 20 per cent discount to Bharti Airtel along with OTT apps. The research and brokerage firm Emkay added that apart from potential subscriber churn from Vodafone Idea and Bharti Airtel, existing Jio prepaid subscribers who are hungry for content might also look to upgrade to the base postpaid plan. “Significant post-paid subscriber additions should improve ARPU with better subscriber mix and might partially resolve the purpose of the potential tariff hike,” it added.
Vodafone idea shares have fallen 8.7 per cent to Rs 9.35 apiece on BSE. The stock, however, has gained 5.17 per cent so far in September. Corporate/Enterprise subscribers form the majority of post-paid users. Emkay in its report highlighted that VIL’s weak financial position and a higher proportion of postpaid subscriber base make it more vulnerable to losses.
No impact on Bharti Airtel, Vodafone Idea
On the other hand, research and brokerage firm Axis Capital noted that there will be no impact on incumbents as only 5 per cent of Bharti Airtel and 8 per cent of Vodafone Idea customers are on postpaid plans; most postpaid over 65 per cent are enterprise customers which are sticky; incumbents have comparable plans which can match RJio with some tweaking, and incumbents provide additional features like handset protection. Axis Capital has retained its positive stance on the sector with a preference for Bharti Airtel and Reliance Industries. It also expects the postpaid market to become attractive with the reduction of pricing difference between prepaid and postpaid.
Bharti Airtel may follow Jio’s content offerings
Emkay Global Financial Services is hopeful that Bharti Airtel will follow Jio on content offerings, which should limit subscriber losses and the impact on revenues. Jio’s aggressive efforts should add to Bharti’s recent underperformance as it would raise questions on a potential tariff hike in the near term. “A lack of tariff hike visibility in the near term, the success of Jio’s renewed postpaid push, delayed reaction from Bharti to counter Jio and the ability of VIL to raise funds will be key factors for Bharti’s stock price performance,” it said.