While the full impact of Reliance Jio Infocomm Ltd’s launch is yet to be seen in the results of telecom incumbents, the September quarter points to some effect having set in already. Jio began operations with free services in early September.

The largest impact, as expected, was seen in realizations in the data segment. They fell by 10-12% for Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd on a sequential basis. But note that this was largely because incumbents pushed volumes at the cost of per unit realization, more or less following Jio’s lead. Data revenue rose between 1.4% and 2.2% for the three largest firms.

On a year-on-year basis, growth in data revenue fell to 23.6% and 19.2%, respectively, for Bharti and Idea. This is a further drop from the 35% and 27% growth they reported in the June quarter. About a year ago, growth rates were as high as 70-80%.

Voice revenue growth remained sluggish, although the two major listed firms, Bharti and Idea, adopted different strategies in this segment. “Idea’s voice revenues grew 6.6% on a year-on-year (y-o-y) basis; growth was largely driven by a 3% growth in both volumes and realizations each. Bharti’s voice revenues grew 4.2% y-o-y; growth was largely driven by a 11.1% growth in volumes offset by a 6.2% decline in realizations. The figures show the difference in tactics adopted by the two firms," analysts at Kotak Institutional Equities.

The two companies’ margin performance also differed materially. Although both companies grew overall India wireless revenues by 7-8%, Bharti maintained margins, while Idea reported a 200 basis points drop in margins owing to higher network costs. Idea has been playing catch-up with its network rollout, and costs can be expected to continue rising. One basis point is 0.01 percentage point.

At the same time, realizations as well as average revenue per user will continue to fall, especially with Jio extending its offer of free services till end-March. Bharti seems relatively better placed with its superior spectrum coverage and lower gearing. It’s little wonder Idea shares have fallen much more since the Jio launch in September.

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