Takeaways from rural trip, Mumbai store visits

12 May 2023 , 10:52 AM

 

• Channel payouts have come off from elevated levels. 
• Rural slowdown has affected smartphone sales but not top-ups. 
• Bharti has seen limited churn despite raising entry-level tariffs sharply. 
• Telcos have taken subtle ARPU improvement initiatives without resorting to headline tariff hikes.
• Even 2G users are increasingly looking at unlimited voice plans.
• While users appreciate the lack of buffering on 5G, higher voice call drops than 4G is a dampener.
• Watching IPL matches on the Jio Cinema app is becoming increasingly prominent in both Mumbai and rural areas.

 

Rural survey — channel payouts coming off from elevated levels

The biggest takeaway was significant (15-25%) reduction in trade payouts by telcos on new SIM activation and Mobile Number Portability (MNP). As % of revenue, Sales & Distribution expenses have risen by 80 basis points/170 basis points/520 basis points in past 6 quarters for Jio/Bharti India/Vi. Normalization in S&D expenses can support EBITDA margin at a time when NW opex would rise for Jio and Bharti, led by 5G rollouts.

Rural spending on top-ups largely resilient; subtle ARPU improvement initiatives

ARPU improvement initiatives from telcos are in the form of: 1) Blocking incoming calls in case the customer does not top up (telcos offer some grace period, but Bharti seems to be most stringent). 2) Allowing data top-ups only thrice after the expiry of validity period of a voice & data plan (i.e. the customer has to top up with a voice & data plan in the fourth instance). 1.5GB/day plans remain the most popular for all telcos. No village that analysts at IIFL Capital Services visited had 5G network.

Mumbai store visits — 5G off to a steady start

5G uptake has been steady, but lacks the buzz that 4G saw in its initial days. Availability of EMI schemes has partly offset the affordability-impact from rising smartphone prices. Unlimited 5G data on plans priced Rs. 239 and above ensures that the user does not have to worry about allowances. Most users consumed 2-5GB/day. If TRAI acts on Vi’s complaint and bans unlimited 5G plans, analysts at IIFL Capital Services expect the top-2 telcos to introduce plans with reasonably high 5G data limits.