Jio's network cost per tower less than Airtel's but gap shrinking: Analysts

The network cost per tower of Reliance Jio is lower than its rival Bharti Airtel even as the gap between them is narrowing due to the latter cutting costs at a faster pace, analysts said.

While the energy cost per tower for both telcos is reducing, Airtel has managed to reduce costs at a faster pace, brokerage firm IIFL Securities said in a research note.

"Jio used to enjoy 35 per cent lower network cost per tower, including the right of use (RoU) depreciation and lease finance cost, versus Bharti four years back. This gap has now (FY24) narrowed to 7 per cent," it said.

RoU asset allows companies to utilise a leased item for the length of a contracted lease term.

Its value depreciates over the lease term or the useful life of the underlying asset.

While Jio continues to be lower than Bharti on a cost-per-tower basis, the gap between the two has been narrowing.

"We look at the sum of rental costs under network opex, depreciation of RoU assets, and finance cost on lease.

"On a per-location basis, this cost for Bharti declined 3 per cent year-on-year after an 8 per cent rise in FY23.

"Jio's corresponding cost was down 1 per cent Y-o-Y," the report said.

On this metric as well, Bharti has brought down its cost gap vis-a-vis Jio to 10 per cent, as compared to 30 per cent in FY20.

Energy costs falling

Jio s energy cost per tower witnessed an impressive 10 per cent fall in FY24 versus Airtel s 12 per cent decline.

Airtel has brought its cost gap with Jio down to just 4 per cent as compared to 34 per cent in FY20, the report said.

Jio had an estimated average tower count of 328,750 at FY24 end.

This was higher than Airtel's average tower count of 296,620.

IIFL Securities said Jio had 1.8 lakh unique 5G locations as compared to Bharti s 1.04 lakh at the end of FY24 based on channel checks, after the FY23 and FY24 rollouts.

"This works out to 55 per cent of Jio s own 4G footprint.

"We believe that this is adequate for now since customers can fall back on the 4G network in areas without 5G footprint," it said.

Up to 30 per cent of Jio s data traffic is carried on the 5G network, suggesting that 5G has significantly contributed to de-bottlenecking, it added.

This compares with 15 per cent for its rival Bharti.

In FY24, Jio saw a 7 per cent annual rise in the reported network operational expenses to Rs 30,500 crore.

The research report pointed out that Jio's selling and distribution expenses jumped 37 per cent year-on-year in FY24 due to Mobile Number Portability-related payouts.

"With a more competitive Vi, this cost line item may stay elevated in the foreseeable future," it said.