The Just in Time execution Telecom Giant Idea Cellular reported weak net addition numbers posted by telcos in the month of April
suggests to us that the top two incumbents are following Idea?s cue by pulling out promotions from the market which might increase voice realizations and improve operating margins, while leading to weaker net additions over the short term.
Q4?16 saw divergent trends in the Indian mobile space with Idea pulling back some of the freebies from the market, but top two incumbents continued to be aggressive with voice tariffs. As a result, while Idea saw a 5% rise in ARPMs QoQ, its subscriber additions growth fell to 3.2mn compared to 5.3mn growth registered in Q3?16. Conversely, Bharti saw its ARPMs declining by 2.7% QoQ and reported subscriber growth at 7.9mn (vs 8mn in 3Q?16).
However we note that as per the latest subscriber data in April?16, net adds for the top two incumbents has also slowed down compared to the subscriber growth registered in Q4?16. Airtel's net additions in the month of April slowed down to 0.98mn, compared to average monthly net add of 2.65mn registered in Q4?16. Idea?s net adds number too continued to be weak, as it registered a decline of 0.39m net subscribers, in contrast to the average of 1mn per month average subscriber addition in Q4?16. This suggests to us that while Idea continues to be at a discount to incumbents, the top two incumbents have responded to increase in Idea?s implicit voice tariffs by pulling back some of their discounted offers as well.
Reliance Jio launch delay to October-December provides a window of opportunity for Indian incumbent telcos to raise their implicit voice tariffs. We see an increase in realizations as possibly benefitting the operating margins of telecom companies.
