What factors will drive market share gains, better profitability for Jio, Bharti?

Analysts at Emkay Research said that Bharti Airtel discontinued its Rs 99 plan in November 2022 in Haryana and Odisha, followed by other circles; this may have impacted the subscriber additions for the company.

Track: Performance of telecom sector stocks

“Reported subscriber base fell by 0.8 million in Apr-23 and has been stagnant over the last years. Jio added 3 million subscribers, while Bharti (+0.1 million) reported steady subscribers. VIL continued its subscriber decline losing 3 million subscribers,” brokerage Jefferies said in a note.

VIL's 4G subscriber losses in April 2023 were the second highest in two years and this is the second time that VIL has lost 4G subscribers in the last three months.

“This suggests that 5G rollouts by Bharti and Jio are putting pressure on VIL's 4G subscriber base,” Jefferies added.

The sector's mobile number portability (MNP) requests at 11 million were lower month-on-month but still remained at elevated levels in April.

“This suggests stiff competition in the sector and focus on market share gains. Higher levels of MNP could also be due to VIL users porting out to experience 5G on Bharti or Jio. This is likely to keep churn levels elevated and drive up sales and marketing costs for telcos,” it noted.

Two-Horse Race?

Over the last four months, Jio's active subscriber additions at 16.3 million have been 3x of Bharti's 5.3 million subscriber additions. Additionally, Bharti continues to gain market share among 3G/4G subscribers.

“Jio's active subscriber leadership and Bharti's 3G/4G market share gains bode well for tariff hikes. Furthermore, VIL's 3G/4G subscriber losses indicate pressure on its 4G subscriber base and could result in accelerated market share shifts towards Jio/Bharti over the next few months,” Jefferies added.

Analysts are unanimous that the most important trigger for telcos will be tariff hikes, though the quantum and timing are hazy as of now.

Also Read: Vodafone Idea in talks with up to four PE firms to raise Rs 20,000 crore

In a post-earnings call last month, Gopal Vittal, MD and CEO, Bharti Airtel said the company is financially in a stronger place and operating cash flows are expected to more than meet capex needs while reducing leverage as well.

“Yet our concern on return on capital employed remains. At 8.5 percent, this is way too low and we hope some sense will prevail in the industry to move up tariffs sooner rather than later,” he said.

Customer Mix

Jio’s performance on the rural front also improved in April with an increase of 1.6 million, while Bharti added 0.2 million rural subscribers.

Jio continues to have the highest urban mix at 56.1 percent, followed by Bharti at 51.5 percent and VIL at 51.2 percent.

“Even as the two larger operators maintain their focus on 5G rollouts, the key trigger remains the quantum and timeline of tariff hikes. For VIL, the situation continues to be dire and a sizable fundraising is required at the earliest,” Emkay added.

Also Read: Vodafone Idea slumps after British parent values its India investment at nil

Debt-laden VIL is in advanced talks with three to four private equity funds to raise about Rs 20,000 crore, senior officials of the Department of Telecom (DoT) were informed during a recent meeting with Aditya Birla Group Chairman Kumar Mangalam Birla.

A major part of the VIL’s dues to the DoT comes up for payment in FY26. Vodafone Idea has a debt of Rs 2.1 lakh crore.

The assurance from a key telco promoter assumes significance as there are concerns about an adverse impact on VIL because of the delay in raising capital. Also, without adequate capital, the company can neither start 5G services nor expand its 4G services.

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