KOLKATA: Idea Cellular and Bharti Airtel scrips crashed on Friday on the Bombay Stock Exchange with the Kumar Birla-led telcos shares plunging below eight-year lows in the aftermath of Reliance Jio unleashing yet another wave of tariff disruption which is likely to cause more financial misery and customer losses to incumbents in FY19.
Sector analysts said the Mukesh Ambani 4G newcomer is now well within striking distance of poaching the sticky, high-ARPU (average revenue per user) customers of Bharti Airtel, Vodafone India and Idea Cellular, with its new, ultra-low postpaid tariff plan. They said the trio will be forced to respond, dragging earnings further.
"This (Jios plan) is at 50% discount to comparable packs by incumbents and 60% discount to postpaid ARPUs. We have been concerned on postpaid as it contributes 20%-plus of revenues," said a Jefferies report. “With the sharp discount launch by Jio, we expect incumbents to also respond and thus expect further decline in ARPU for Bharti and Idea,” the brokerage added.
JP Morgan said Jios latest plan is “squarely targeted at the latters high-end ARPU subscribers.”
Market leader Bharti Airtels shares fell 6.44% to close at Rs. 385.7 on the BSE after dipping to an intra-day low of Rs. 381.2. The Idea stock plummeted to as low as Rs. 50.80 in early afternoon trade, which was well below its eightyear low of Rs. 51.40. The scrip eventually closed nearly 12% down at Rs. 51.45. Share of Reliance Industries — Jios parent — rose 0.80% to close Rs. 988.50 on the BSE.
Jeffries said Bharti and Idea were likely to respond to Jios latest offer, and suffer a further decline in ARPU. It, however, noted that since the postpaid churn is lower, shift to Jio would be gradual, although the brokerage expects it “to target corporate customers, who make up 40% of the (sectors) postpaid base”.
CLSA though expects incumbents to keep "a 15-20% premium" (over Jio) even if they are "compelled to retaliate" to the 4G newcomer's latest postpaid offer. It said they could partly mitigate the risks of a postpaid ARPU fall through "segmented offers and others such as family plans, which would moderate the cut in subscriber spending".
Nevertheless, CLSA said "Jio's new postpaid tariff is sector negative and would delay ARPU recovery for the industry.
Goldman Sachs expects no. 3 Idea to lose high-end customers if network quality worsens in near term, especially since its capex has been 60-70% lower than Bharti and Jio in the recent past. The US brokerage, however, ruled out any immediate “erosion risks for Bharti Airtels 18 million-strong postpaid customer base, given its investments in network,” but said there could be some pressure on the market leaders ARPU levels, going forward.