Airtel stock hits new highs due to delay in JioPhone launch

Last week, Reliance Industries Limited (RIL) announced that the JioPhone Next, which was earlier planned to launch on September 10, will now be introduced around the Diwali festival, which falls in early November.

Analysts at Motilal Oswal Financial Services Ltd warned of further delays, citing it would take more than a year to resolve the global chip shortage. This is an emotionally positive one for Jio’s close rival Bharti Airtel. Firm’s shares hit fresh 52-week high ₹697 on NSE on Monday. The lack of details like JioPhone Next price and features further helps Airtel. As such, analysts are of the view that the launch may not hurt Airtel’s customer base immediately.

“Bharti’s low Arpu (average revenue per user) customers (15-20%) may be vulnerable. 20 to 30 million customer loss, ie 6-9%, the revenue impact could be 3-5%,” Motilal Oswal analysts said in a report on September 12.

Analysts at Macquarie and CLSA also agree that the JioPhone Next launch is not a major concern for Bharti Airtel. Macquarie maintains outperform rating on the stock with a target price of 12 months ₹867. CLSA has also retained a buy call and raised the target ₹825 per share. “The telecom firm had reported an 18-fold jump in data usage. Arpu is up 46% from low and we expect it to rise ₹199,” CLSA said in its latest report. In June, Bharti Airtel added 2.4 million customers to its visitor location register, a proxy for active customers, after registering a decline of 5.7 million in May, indicating that most Bad was behind.

It further added that Airtel is likely to see an EBITDA (earnings before tax, depreciation and amortization) growth of 24% by FY24. CLSA said Jio’s increasing passive subscription and lower tariff discounts reduce the risk of disruption.

Of course, this doesn’t bode well for RIL’s stock, which recently saw some growth in anticipation of the launch.

Investors would assume that JioPhone’s relaunch in March increased its active subscriber base to over 7 million, which slowed to 2.4 million in June. Against this backdrop, JioPhone Next was seen as the next major trigger for Jio’s customer growth. Analysts have cautioned that Jio may now see some moderation in subscriber numbers in the near term.

Meanwhile, the worst hit could be Vodafone Idea Ltd, which is expected to have a large pool of lesser Arpu customers. Analysts say the telco may face the challenge of increasing customer churn rate if it manages to survive the launch. Vodafone Idea’s visitor location register subscribers continued to decline in June.