PremiumVodafone Idea Ltd may be India’s largest telecom company by subscriber base, but it also happens to be the smallest in terms of revenue market share among private sector operators.
In the June quarter, Vodafone Idea was the only company to post a sequential decline in revenues, while competitors Bharti Airtel Ltd and Reliance Jio Infocomm Ltd reported notable expansion. This is based on quarterly revenue data from the Telecom Regulatory Authority of India (Trai) compiled by SBICAP Securities Ltd.
Based on adjusted gross revenues, including receipts from long- distance services, Vodafone Idea’s market share dropped from 32.1% in the quarter ended March 2019 to 27.8% last quarter. Two years ago, the combined market share of Vodafone India and Idea Cellular stood at 42.5%.
SBICAP Securities estimates Vodafone Idea’s revenue market share to stabilize at around 20% in the medium term, with Reliance Jio seeing further gains by the end of FY20. At the end of the June quarter, Reliance Jio’s revenue market share stood at 31.5%.
While Bharti Airtel’s market share was similar, according to Trai numbers, analysts said Jio achieved clear market leadership in the June quarter. Airtel’s numbers reported to Trai may need some adjustments, they added.
What’s more, the hit from the reduction in interconnection usage charges to zero in a few months will make things worse for the incumbents.
The drop in Vodafone Idea’s market share and operating performance comes at a time when its balance sheet is fast deteriorating. An analysis of its debt and repayment schedules, based on the latest annual report by Kotak Institutional Equities, shows that the company may fall short of funds in about a year from now.
“Our analysis of Vodafone Idea’s debt and deferred spectrum repayment schedules, basis the company’s FY2019 annual report, suggests a need for another round of equity infusion as early as 2Q/3QFY21E unless—(a) there is a quick and steep recovery in ARPU or (b) fiber sale closes and fetches upwards of ₹10,000 crore or (c) some of the debt due for repayment is refinanced or (d) capex credit increases by a sum materially higher than the ₹6,000 crore we assume in our math," analysts at Kotak said in a note to clients. ARPU is average revenue per user.
Of course, asset sales can take Vodafone Idea only so far. What is required is revenue and market share stabilization, but the trajectories have been disappointing till now. With Reliance Jio armed with more resources after its recent deleveraging moves, analysts are worried that it is unlikely to relent on tariffs.
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