Vi may lose up to 70 million subscribers in next one year, says Fitch2 min read . Updated: 01 Dec 2020, 11:56 AM IST
- Fitch Ratings says Vi’s ₹25,000 crore fundraise plan may not restore the cash-strapped telco’s competitive position
- Jio and Airtel may increase combined revenue market share to 80% in the next one year as Vodafone Idea is rapidly losing market share, Fitch said
NEW DELHI: Vodafone Idea Ltd (Vi) could lose 50-70 million subscribers in the next one year, after shedding 155 million customers in the past nine quarters, Fitch Ratings said on Monday. Meanwhile, rival Reliance Jio Infocomm Ltd is expected to gain more than half of Vi’s user losses and the remaining could be bagged by Bharti Airtel Ltd, the rating agency added.
The global credit rating agency said Vi’s plan to raise ₹25,000 crore, in a combination of equity and debt, may not restore the cash-strapped telco’s competitive position and reverse the subscriber losses as the amount would be insufficient for its capital requirements.
Analysts believe that the proposed amount would enable Vodafone Idea, which owes hundreds of billions of rupees to the government in back fees, sustain operations for a maximum of two years. Vi has so far paid ₹7,854 in adjusted gross revenue (AGR) dues, but still owes more than ₹50,000 crore to the department of telecommunications.
Mint on 20 November reported, citing two people familiar with the development, that a consortium of investors comprising US-base Oaktree Capital Management and Varde Partners has proposed investing $2-$2.5 billion in Vi by buying hybrid debt securities.
Jio and Airtel are likely to increase their combined revenue market share to 80% in the next one year from 74% as of September as Vodafone Idea is rapidly losing market share, Fitch said.
“We expect Bharti Airtel and Reliance Jio to increase their combined revenue market share to 80% in the next 12-18 months as the third-largest telco, Vodafone Idea, is rapidly losing market share given its weak balance sheet and limited financial flexibility," Fitch said.
Vodafone Idea lost 1.2 million subscribers in August, which took the telco’s market share to 26.15%, according to Telecom Regulatory Authority of India. Both Reliance Jio and Airtel added customers in August, clocking 35.08% and 28.12% market share, respectively.
Factors such as higher tariffs and deteriorating network quality will add to Vodafone Idea’s subscriber loss. Mint had on 24 November reported, citing analysts, that the Birla group company will need others to join in the tariff hike or risks losing more customers.
Vi’s chief executive, Ravinder Takkar, said in October the telco will not shy away from raising prices of voice and data services and will set a precedent in the industry. The management of Airtel has also spoken of a tariff hike but has not indicated the timeline yet.