Impact of JioBharat on Airtel: Analyst Perspectives

Reliance Jio’s recent launch of JioBharat, touted as the cheapest 4G feature phone priced at ₹999, has stirred discussions among analysts about its potential impact on Bharti Airtel, its primary competitor in the Indian telecom market.

Disruption in the Market: Jio’s Strategy

Reliance Jio’s disruptive entry into the telecom sector back in 2016 reshaped the industry landscape. Now, with JioBharat, analysts foresee another wave of disruption. Jefferies Equity Research analysts predict that over the next few years, JioBharat could lead to a 1-4% reduction in Bharti Airtel’s India-mobile subscribers.

Market Dynamics: JioBharat’s Appeal and Target Market

The competitive pricing and decent quality of JioBharat are expected to appeal to existing feature phone users, potentially allowing them to save up to 26% on their mobile expenses by switching. However, analysts note that users content with their current devices may not make the switch. Nevertheless, JioBharat is estimated to target approximately 60-65 million users annually, potentially adding 55 million subscribers to Reliance Jio’s base by March 2026.

Airtel’s Subscriber Landscape: Potential Challenges

Bharti Airtel currently holds a significant share in the feature-phone market, with around 130 million active 2G subscribers and over 100 million paying voice subscribers. Despite its strong network infrastructure, Airtel’s dominance in the feature-phone segment may lead to higher subscriber losses. The report suggests that Airtel could experience voice subscriber churn of around 17 million by March 2026, resulting in a 1-4% reduction in India-mobile subscriber estimates.

Additional Factors Impacting Airtel’s Growth

Apart from the JioBharat launch, other factors are influencing Bharti Airtel’s growth trajectory. Jio’s focus on network expansion and potential delays in tariff hikes could affect Airtel’s revenue projections. Additionally, the devaluation of the Nigerian Naira against the USD has impacted Airtel’s Africa operations, leading to a reduction in revenue and EBITDA.

Investment Outlook: Maintaining BUY Rating

Despite the challenges posed by JioBharat and other market dynamics, analysts maintain a BUY rating for Bharti Airtel, citing a favourable risk-reward scenario. They anticipate strong growth with a 15-16% CAGR in India revenue and EBITDA over FY 2023-2026. Factors such as Airtel’s share gain in 4G subscribers, intentions to increase ARPU, and a positive tariff outlook contribute to this recommendation.

In conclusion, while JioBharat may introduce challenges for Airtel, the company’s strategic initiatives and market position suggest resilience and potential for growth, making it an attractive investment opportunity.