Jio, Airtel to Continue Gaining Market Share of Vodafone Idea: Analysts

Analysts have said that Reliance Jio and Bharti Airtel will continue to see their Revenue Market Share grow, as Vodafone Idea struggles to invest enough capex in its 4G network.

Vodafone Idea Losing Footing to Jio and Airtel

According to Jefferies, Bharti Airtel and Reliance Jio, two of India's top 3 telcos, boast 72% RMS between them. They have clocked 60 basis point (bps) and 120 bps gains Y-o-Y in the June quarter. Notably, that move took  their RMS to 38% and 34%, respectively. However, Vodafone Idea lost another 180 bps, reducing its RMS to a modest 19% during the same period.

Vi's situation does not help its case at all. Analysts estimate the churn to continue; with Jio and Airtel benefitting from the same. What's more, the government's relief package will also help out the other two telcos, not just Vi; any incremental cash flows will go to due payments, and not into 4G capex.

“If Vi continues to be unable to adequately invest in its network, then (revenue) market share gains for Bharti/Jio will continue, and any form of relief from the government would be an added positive for Bharti and Jio,” Jefferies said in a note.

This underinvestment has already seen Airtel go from 61,000 broadband base stations in Q1FY21 fo 215,000 in Q1FY22. This investment has seen Airtel gain 46 million subscribers over the past fiscal. For comparison, Vodafone Idea added about 8 million new users over the same time.

Over the last few weeks, all the three telcos have announced their Q1 results for FY22. Reliance Jio and Bharti Airtel reported a 4% and 2% sequential revenue growth, while Vi’s revenues fell nearly 5% on quarter. Vodafone Idea had, worryingly, reported the worst numbers in over two years.

However, there is a silver lining; Jeffries said that due to the recent hikes, telecom sector growth with pick up starting next quarter. However, there won't be any more hikes coming soon; Reliance Jio announced the JioPhone Next, in partnership with Google, which goes on sale from September 10. The other two want to give no excuse to their customers to churn to Jio right now.

Vodafone Idea Needs Cash. Fast.

Goldman Sachs estimates that “Vi needs $9.5 billion of capital over the next four years to arrest revenue market share erosion”.

That sounds rather difficult, as the telco hasn't closed its Rs 25,000 crore funding. If the telco does not close this soon, it is looking at a $3.1 billion cash shortfall. Moreover, Vodafone Idea would continue losing customers and lose RMS to Jio and Airtel. Their lower network capex amid rising data consumption will worsen user experience, causing further churn.

Nitin Soni, senior director at Fitch, said Vodafone Idea's modest Rs 940-crore network capex in the June quarter, if annualised, translates to only Rs 3,760 crore or around $500 million.

In contrast, Jio and Airtel are investing $3 billion in network annually. This is too low to even maintain a 4G network or to compete with Jio and Airtel.

Notably, the three private players have sought relief from the government. In a letter to the top government officials, COAI has called for reduced telecom charges, longer spectrum lease tenures, and easier payment terms for statutory dues.