The number of recharges by prepaid customers, comprising more than 90 percent of users for India's top three telecom operators, have declined since Mukesh Ambani-led Reliance Jio Infocomm Ltd. launched its services in September last year, according to a research report by UBS Securities.
Recharge volumes declined 24 percent for Bharti Airtel Ltd. and fell 24 percent for Vodafone India Ltd. and Idea Cellular Ltd. each, the report by UBS Evidence Lab, an affiliate of UBS Securities, said. The data from 556 SIM distributors surveyed across eight cities suggest the worst decline was between September and March.
The rate of decline has slowed down since March, when Jio started charging customers for its services, the report said.
While the rate of decline has moderated, July recharges are still lower than March by 6-8 percent due to further loss of share to Jio and reduction in ‘value of recharges' as incumbents launch their own offers to counter Jio.UBS Evidence Lab Research Report
The trend supports the quarterly numbers of telecom operators. Bharti Airtel, Vodafone and Idea Cellular's revenue declined in six months to March as Reliance Jio offered free services during the period. The revenue largely stabilised in the quarter ended June after the Ambani-led company started charging its users since April, offering some respite to older rivals.
Reliance Jio is making good progress in distribution, according to the survey. More than half of the distributors surveyed offer Reliance Jio connections and another 25 percent intend to by the end of the year.
The broking firm said Reliance Jio will gain revenue market share over the next four years, mostly at the expense of smaller operators and partly Aditya Birla Group-owned Idea Cellular.
Airtel: Consumers' Preferred Choice
The research found nearly two-thirds of the distributors believe that consumers prefer Airtel over other operators.
“We believe Airtel's FY19 estimated Enterprise Value (EV)/EBITDA of 7.4 times, compared to other telecom operators at 9-10 times under-estimates its solid competitive positioning in a growing market,” the research report said.
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