“Worst is behind us” — Bharti Airtel CEO on ARPU decline

Airtel Q3 (shaded) vs Q2 numbers

Bharti Airtel CEO Gopal Vittal said he believes the worst is over as far as the company’s revenue decline is concerned.

During the last three months of 2017, Airtel saw the highest ever decline in both its India mobile revenue as well as per-user revenue as it struggled to compete with new entrant Reliance Jio.

Answering questions about whether average revenue per user or ARPU will fall again or whether it will improve going forward, he said: “We have to wait and watch.. My sense is that the worst is behind us.”

During the last three months, Airtel’s India mobile revenue fell by 12%.

Similarly, ARPU — the average revenue (or bill size) that the company is able to generate from a single mobile customer — fell even faster, by 15.2%, from Rs 145 per month for the three months ended September to Rs 123 per month for the three ended December.

Over the last one year, Airtel’s India mobile ARPU has fallen from around Rs 175 per month as many of its mobile customers in India have moved from expensive plans to the ultra-cheap plans. It is now below the ARPU of Rs 150 that the newcomer Reliance Jio claims.

Vittal pointed out that due to the high level of competition from new operator Reliance Jio, Airtel and others have been forced to offer plans that give almost everything at just around Rs 130 per month.

For Rs 130 per month, he pointed out, you get unlimited voice calling, roaming, SMS and 1 GB of data per day.

Before Jio’s entry, such a plan on Airtel would have cost about Rs 1,000 per month.

Even today, said Vittal, customers are willing to pay more than Rs 130, but the market dynamics is such that the price cannot be increased.

“Even though customer is willing to pay 300 or 400 or 500 for such a plan, it’s capped at 130 per month,” he said.

It, however, remains to be seen how prophetic Vittal’s optimism is, given recent cuts in Reliance Jio’s pricing.

The new operator cut the price of its 4G data by about 31% to Rs 3.56 per GBin early January from Rs 5.19 per GB in October-December.

Jio is now offering 1 GB of data per day and unlimited calls for Rs 149 per month, compared to Rs 199 offered by Airtel, which makes it cheaper by about 25% compared to the incumbent.

Incumbents like Airtel will be forced to cut their prices further if the 25% discount offered by Jio proves to be irresistible to their customers, many of whom maintain a secondary Jio connection on their dual-SIM phones.