Reliance Jio’s AGR Rises Over 14% After Tariff Hike: Analyzing the Telecom Sector’s Performance
The telecom industry in India witnessed a significant shift in the July-September 2024 quarter following tariff hikes by private operators like Reliance Jio, Bharti Airtel, and Vodafone Idea. These increases, ranging from 11% to 25%, contributed to notable changes in revenue and subscriber metrics. Here’s a comprehensive look at the developments and their implications.
Key Financial Highlights
Industry-Wide Revenue Growth
- The gross revenue of India’s telecom operators rose by 10.5% year-on-year (YoY) to ₹91,426 crore during the quarter, according to the Telecom Regulatory Authority of India (TRAI).
- The adjusted gross revenue (AGR), which determines government levies, surged by 13.11% YoY to ₹75,310 crore, up from ₹66,583 crore in the same period last year.
Reliance Jio’s AGR Performance
- Mukesh Ambani’s Reliance Jio recorded a 14.19% YoY increase in AGR, reaching ₹27,652.68 crore.
- Jio’s growth outpaced Vodafone Idea’s 4.39% increase but lagged behind Airtel’s impressive 24.15% AGR growth.
ARPU Trends
- Average Revenue Per User (ARPU), a critical metric for telecom operators, rose by 9.60% quarter-on-quarter to ₹172.57 in the September 2024 quarter, from ₹157.45 in the previous quarter.
- On a YoY basis, ARPU saw a substantial increase of 15.31%.
- For prepaid connections, ARPU stood at ₹171, while postpaid users generated a slightly higher ARPU of ₹190.67.
Impact of Tariff Hike on Subscriber Base
Despite revenue gains, the tariff hikes led to a decline in the total mobile subscriber base:
- The subscriber base fell by 1.68 crore quarter-over-quarter, dropping from 117 crore in June 2024 to 115.37 crore in September 2024.
- This decline highlights the delicate balance between maximizing revenue and retaining subscribers in a competitive market.
Performance of Other Operators
Bharti Airtel
- Bharti Airtel, led by Sunil Mittal, outperformed Jio in AGR growth, reporting a 24.15% YoY increase.
Vodafone Idea
- Vodafone Idea’s AGR rose by 4.39% to ₹7,836.98 crore, reflecting moderate growth compared to its competitors.
BSNL
- Bharat Sanchar Nigam Limited (BSNL) posted a marginal AGR increase of 1.54%, reaching ₹1,996.77 crore.
Important Observations and Insights
- Revenue Growth Amidst Tariff Hikes
- The revenue growth highlights the telecom sector’s ability to absorb tariff hikes, even as the subscriber base shrinks.
- Rising ARPU
- The ARPU increase suggests that higher tariffs successfully compensated for subscriber losses, driving profitability.
- Market Dynamics
- Reliance Jio continues to dominate in absolute revenue terms, but Airtel’s higher AGR growth indicates strong competition.
- Vodafone Idea’s relatively modest growth reflects ongoing struggles to keep pace with larger rivals.
- Subscriber Decline
- The reduction in subscribers points to potential affordability challenges for lower-income users in light of higher tariffs.
- Segment Insights
- The postpaid segment’s higher ARPU indicates a more lucrative revenue stream compared to prepaid services, which dominate the Indian market.
The July-September 2024 quarter highlighted the telecom sector’s evolving dynamics, with tariff hikes driving substantial revenue growth but also leading to subscriber attrition. Reliance Jio, with a 14.19% rise in AGR, reinforced its position as a market leader, though Airtel’s higher growth rate signals robust competition. While the sector continues to grow in revenue, balancing affordability and profitability remains a key challenge for operators in the long term.
