Dolat Capital, a financial firm engaged in the trading markets on Monday said that Bharti Airtel with its “superior execution” had seen “healthy subscriber additions ahead of Reliance Jio.” The firm in a report said that the third quarter of the current financial year had been a “complete foregone quarter” on the aspect of tariff hikes. Dolat Capital said that there had been “high hopes” of a potential hike in tariff post the adjusted gross revenue (AGR) verdict in early September, 2020.
Reliance Jio Expected to “Witness Further Moderation” in User Additions
The firm said that Reliance Jio is expected to “witness further moderation” in user additions as the operator faces “potential spectrum crunch” along with the farmer agitations also having an impact on the subscriber numbers.
It is said that Reliance Jio requires to spend Rs 28,000 crore to renew its expiring spectrum. The largest wireless operator in India is said to have 115 MHz of spectrum in the 800 MHz band that is said to have been acquired/shared from Reliance Communications up for expiry across 19 circles.
The firm engaged in the trading markets said that the “lacklustre performance” by Reliance Jio on subscriber additions post the operator raising funds in 2020 may result in “another tariff war.” However, Dolat Capital also said that the tariff war may be “unlikely” as Reliance Jio will be a “major loser” as the operator is now the market leader. The firm said that the “lacklustre performance” by Reliance Jio may thus lead to a “potential price increases to drive performance.”
Vodafone Idea Fundraise “Key Risk” with Lack of Material Price Increase
Dolat Capital highlighted that Vodafone Idea continues to lose users as the operator has issues in “optimising cash flows.”
“With industry consolidation and struggle of VIL, telecom remains a long-term compounding story,” Dolat Capital said in a report. “The sector is likely to turn out into either ‘two-private player market or Rs 250 ARPU’ scenario with near 100% probability of these events on a combined basis.”
While recent reports suggest that the third largest operator will soon announce a “big round of fundraising,” Dolat Capital said that any such plans will be a “key risk” with the “lack of material price increases.”
“Bharti with its superior execution and Balance sheet strength is best positioned as a pure-player telecom operator,” Dolat Capital said in a report. “Indus Tower is a proxy play on telecom tariff increases but runs the risk of VIL shutdown.”
The firm estimates Airtel to add 7.5 million users in the third quarter while recording 1.5% quarter-on-quarter (QoQ) increase in average revenue per user (ARPU) column. Further, Dolat Capital estimates Reliance Jio ARPU to hit Rs 147 in the third quarter, translating to an 1.5% increase QoQ with the operator registering five million user additions.
