In Short:
Reliance Jio paid the lowest dealer commissions among India’s three private telecom carriers in FY24, at just 3%. In contrast, Bharti Airtel and Vodafone Idea paid 4% and 8.4%, respectively. Jio’s lower commissions resulted from relying on its parent company’s resources. Analysts expect Airtel to continue spending heavily to maintain its market position, as Vi also prepares to enhance its services after a recent fundraising effort.
Reliance Jio has reported the lowest payouts towards dealer commissions and promotional spends among India’s three major private telecom carriers for the fiscal year 2024 (FY24). According to a recent analysis of annual reports by experts, Jio‘s dealer commissions accounted for only 3% of its FY24 sales, a figure that falls short of Bharti Airtel‘s 4% and Vodafone Idea’s (Vi) 8.4%, as noted in a research note by Jefferies.
Analysis of Promotional Strategies
The report highlights that Bharti Airtel, under the leadership of Sunil Mittal, continues to invest significantly in promotional activities to attract high-value customers, thereby maintaining its leadership in average revenue per user (ARPU). In a competitive landscape where Vi is increasingly at risk of losing its high-revenue 4G users to larger rivals like Jio and Airtel, substantial dealer commission payouts are critical for customer retention.
Moreover, analysts argue that Jio benefits from the extensive infrastructure of its parent company, Reliance Retail, alongside its in-house media assets for advertising purposes. This strategic positioning allows Jio to maintain lower marketing and branding expenditures.
Growth Trends in Dealer Commissions
The research indicates that Jio’s dealer commissions, paid to Reliance Retail, increased by 8% year-on-year in FY24, which is notably lower than its revenue growth of 10% YoY. This trend is unexpected, especially when compared to the more rapid growth of dealer commissions for Airtel and Vi, which surged by 16% to 26% in the same period, according to Jefferies.
In quantified terms, Jio‘s dealer commissions at 3% of sales equate to approximately Rs 3,000 crore. In contrast, Airtel and Vi have higher payouts, estimated at around Rs 6,000 crore (4% of sales) and Rs 3,583 crore (8.4% of sales), respectively. Furthermore, Airtel‘s recent increase in dealer commission payouts has escalated its overall sales and marketing costs by 13% year-on-year, reaching Rs 8,133 crore last fiscal, as reported by CLSA.
Market Position and Future Outlook
Industry executives observe that Airtel‘s robust sales and marketing investments, including premium branding initiatives, are essential for sustaining its ARPU superiority and enhancing market share. In Q1 FY25, Airtel’s ARPU was Rs 211, approximately 16% higher compared to Jio’s Rs 182.
In contrast, Jio‘s sales and marketing expenditures in FY24 stood at around Rs 2,490 crore. The company’s customer servicing expenses, comprising only 0.2% of sales, were significantly lower than Airtel‘s 0.6% and Vi’s 1% of sales during the previous fiscal year.
IIFL Securities has reported that Jio’s sales and distribution expenses, a component of overall sales and marketing costs, rose by 37% year-on-year in FY24, driven by increased mobile number portability-related payouts. With Vi becoming more competitive post-fundraising, IIFL projects that these costs will likely remain elevated.
Prospective Developments
Looking ahead, analysts expect Vi to enhance its spending on customer acquisitions, advertising, and business promotions, particularly as it works to broaden its 4G coverage in strategic markets and initiates 5G rollouts in key urban centers. These efforts aim to effectively compete with Jio and Airtel for high-value customers.
Recent company data and estimates from IIFL indicate that Vi’s selling, general, and administrative (SG&A) costs rose by 4.9% in FY24, reaching Rs 4,845.3 crore. Following its substantial Rs 24,000 crore fundraising via equity, Vi is in discussions with lenders to secure an additional Rs 25,000 crore in loans and an extra Rs 10,000 crore in non-fund-based facilities as part of its ambitious Rs 55,000 crore network capital expenditure plan over the next three years.
