Shares of telecom service providers, primarily Bharti Airtel and Vodafone Idea (VIL), fell 6 percent on the BSE on Wednesday after rival Reliance Jio (RJio) announced a range of postpaid plans, including many first, like the mobile in flight. Connectivity
Bharti Airtel was down 7 percent to Rs 437, while Vodafone Idea fell 8 percent to Rs 9.47. By comparison, the S&P BSE Sensex was up 0.5 percent to 37,926 points, as of 11:45 a.m. Shares in Airtel hit a more than seven-month low today, falling 28 percent from its record high of Rs 612, reached on May 20, 2020. It was trading at its lowest level since April 7, 2020.
Rjio, which started operations in 2016, has become the largest operator due to aggressive marketing and attractive low-cost plans. However, less than 1 percent of its more than 398 million subscribers are in the postpaid segment. In contrast, Airtel and Vi (Vodafone Idea) have 5.2 and 7.2 percent of their customers in the postpaid category. CLICK HERE TO READ THE FULL REPORT
The announcement of the new carrier’s postpaid plans, while traditional carriers have similar rate levels (except for the base rate which is 20% cheaper than Airtel’s offering), largely have the benefits of three main OTT subscriptions (basic Netflix, Amazon Prime, Hotstar VIP) as a key attraction in addition to offers such as family packages and international roaming. Airtel’s postpaid base, VIL was at 14.6 million, 21.5 million, as in the first quarter of fiscal year 21, respectively.
“A large part (more than two thirds) of the postpaid category in our opinion is driven by corporate connections in India (more rigid and based on mutual terms). Therefore, the response of the non-corporate segment will be key to the churn, ”ICICI Securities said in a note.
We believe that the offering has the potential to drive at least some rotation of incumbents, unless they coincide with OTT offerings. Combining the offering, on the other hand, could result in additional annual costs for Airtel and Vodafone Idea. The announcement, however, puts VIL in a bind as it would have to overcome increased costs, the brokerage said.
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First Post: Wed Sep 23, 2020 11:49 AM IST
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