India’s top two telcos, Reliance Jio and Bharti Airtel, have seen sharp on-year jumps in their respective selling, general & administrative (SG&A) costs in the fiscal second quarter, amid higher customer churn caused by SIM consolidation after the headline rate hikes of July.Industry executives and analysts said Jio and Airtel’s significantly higher SG&A payouts signalled heightened competition to retain and acquire high-value customers after the recent price hikes. They added that this also indicated Jio and Airtel are incentivising mobile number portability (MNP) through higher channel payouts to distributors and dealers.As per company data, Jio’s SG&A costs have jumped 41.3% on-year to Rs 1,601 crore in Q2FY25, during which Airtel’s payouts on this score jumped 28.1 % on-year to around Rs 3,034 crore. This, with both Jio and Airtel reporting higher customer churn at 2.8% and 3.2% respectively in the fiscal second quarter compared with 1.7% and 2.8% respectively a year ago.Jio and Airtel lost 10.9 million and 2.9 million customers respectively in the fiscal second quarter after price hikes taken early-July.“SG&A expenses grew in Q2FY25 on higher churn rates due to SIM consolidation and (market) aggression from BSNL (which did not increase tariffs),” ICICI Securities said in a research note.India’s private carriers had raised rates by 11-25% in July while state-run BSNL did not.SG&A, typically, comprises a telco’s sales and marketing (S&M) spends towards customer acquisition, advertisement/promotion as well as others such as content costs, bad debt provisions and miscellaneous expenses.Company data showed Jio/Airtel’s SG&A costs increased to 5.6%/9.6% of revenues in Q2FY25 from 4.6%/8.7% of revenues a year ago.Vinish Bawa, partner and leader (telecom) at PwC India, said SG&A costs have been rising in the past few months due to a combination of factors such as branding spends, MNP incentivisation, higher churn and largely stagnant average revenue per user (ARPU) of some telcos.“Rising SG&A costs are a key indicator that telcos are incentivising MNP through higher channel payouts. Higher churn rates too have been a trend, and telcos will be looking at ways to reverse this in coming times,” Bawa told ET.But Airtel’s SG&A costs are still more than double that of Jio’s as the Sunil Mittal-led telco’s premium branding and pricing strategy remain vital for acquiring and retaining high-value customers as well as sustaining its higher ARPU compared with the telecom market leader. Airtel’s ARPU—a key performance metric—at Rs 233 was almost 20% higher than Jio’s Rs 195 in Q2FY25.
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