Can Airtel Broadband resist JioFiber?
Created on 11 Sep 2019
Wraps up in 4 Min
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Updated on 12 Oct 2020
Have you ever felt that you have been an average student or an average employee at work or just an average person all through life? If yes, then I'm sure a topper seems threatening to you. But, the truth is that a topper can only replace another topper and marginally affect the status of an average student. I have always observed this and have been an average student in school.
In a world where everyone is seeking alpha, most people do not chase above-average things or even stocks to meet their goals. Similarly, in a world where everyone is trying to become a Reliance Jio, some people choose to be like Bharti Airtel. The average players do not get shaken and stirred by new entries.
This does not imply that one should not strive for the best, it merely means that settling with becoming better versions of oneself helps to reach pinnacles of success and gives returns without getting hit by the external factors.
Reliance Jio has big plans to dominate the fiber-to-the-home services, which was launched on 5th September 2019. Jio cannot classify this new launch of the JioFiber as a massively disruptive service as compared to the launch of the mobile services in 2016. But will it affect Airtel Broadband in any way?
Who is ought to get affected by this launch?
The launch of Jio's FTTH service of JioFiber will impact Bharat Sanchar Nigam Limited (BSNL) the most as it is the market leader in the wireline broadband services. The total user base of the same in India is 18.45 million, and BSNL has a market share of almost 50%. Bharti Airtel has 2.39 million users who make for about 11% only.
Why will only BSNL be hit by the launch?
- Reach: Presently, BSNL is the only player for wireline broadband service with its presence in all the cities and towns of the country, except significant cities like Delhi and Mumbai where MTNL is dominated. Whereas, Bharti Airtel has segmented itself and is present in 99 cities. In 19 years, Bharti Airtel made its presence in limited areas in these 99 cities. Reliance Jio aims at a target to reach 20 million residences and 15 million business establishments in 1,600 towns in the next one year.
Making a presence will take time as the fiber laying procedure is time-consuming. But, Jio’s main competition is with BSNL as Airtel has a segmented presence.
- Price: Across the packs, the price is 12% to 23% lower than Airtel but similar to or a little higher than the local providers. Reliance Jio hasn't brought in any significant disruption with its tariffs and packages. The plans will start from Rs. Seven hundred per month and go up to Rs 10,000 per month. Bharti Airtel's current tariffs begin from Rs 799 to Rs 1,999 per month. BSNL's plans and tariffs are lower than that of Bharti Airtel.
- Speed: The speeds offered are higher in low-end plans for Reliance Jio. With competitive pricing, the critical points for attracting users is the reach and the service provided. BSNL has lower speeds. Bharti Airtel offers 40-300 MBPS but can deliver 1GBPS. Reliance Jio will offer 100 MBPS to 1 GBPS. Therefore, the most affected in terms of speed will also be BSNL.
- Revenue: The overall revenue in the wireline broadband service is contributed by BSNL and Bharti Airtel as of now. The revenue of BSNL for FY2019 was Rs 4000 crores in this segment out of Rs 19308 crores for the entire revenue of the company. Bharti Airtel made for about 11% of the overall revenue of Rs 59,858 crores in India.
Various reports suggested that Airtel had very less to lose, but BSNL was going to get hit with the ongoing downfall. A report by Kotak Institutional Equities stated that Jio's venture into the fiber broadband services would affect BSNL's only growing segment of the wireline business. If that gets changed, the company will make losses which are hard to recover.
Another report by the Bank of America Merrill Lynch states that the limited impact of the launch on Bharti Airtel is major because the fixed broadband penetration is low in India and untapped markets still exist. Thus, there is an opportunity to tap into the market. There will be a limited impact on the revenues of Bharti Airtel as Jio will take time to gain market share in this segment because of the sticky nature of consumers for the wireless service segment.
We think Airtel Broadband will be able to resist Jio Fiber provided there is not much of new disrupting news from Reliance Jio.
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