Jio and Airtel Duopoly May Happen Soon: Jefferies

Reported by Tanay Singh Thakur August 3rd, 2023 at 07:17 pm

There are millions of 2G users in the networks of Airtel and Vi. The launch of the Jio Bharat phone platform is to attract these 2G customers and offer them 4G services. This would accelerate the growth of subscriber addition for Jio but would mean a faster subscriber loss for Vi.

Highlights

Reliance Jio and Bharti Airtel have been dominant forces in the Indian telecom industry over the last five years.
Vodafone Idea (Vi), a third-private telecom player, has been struggling to lift its business activities since its merger in 2018.
Analysts have maintained that Vi needs to raise funds fast so that it can meet its short-term payments of debt and statutory dues.

Jio, Airtel

Reliance Jio and Bharti Airtel have been dominant forces in the Indian telecom industry over the last five years. Vodafone Idea (Vi), a third-private telecom player, has been struggling to lift its business activities since its merger in 2018. Analysts have maintained that Vi needs to raise funds fast so that it can meet its short-term payments of debt and statutory dues, as well as roll out 5G and expand 4G. But the market has not seen any major developments related to fundraising for Vi.

Due to inferior business performance, Vi has been losing customers to its competitors for several years now. Due to some recent developments, such as the launch of 5G by the competitors, revamped postpaid offerings, and the announcement of the Jio Bharat phone platform by Reliance Jio, Jefferies Financial Group Inc believes that Vi may lose users at a faster rate to the competitors. BSNL (Bharat Sanchar Nigam Limited) is not really considered competition for Vi because the state-run telco doesn't offer PAN-India 4G services yet.

There are millions of 2G users in the networks of Airtel and Vi. The launch of the Jio Bharat phone platform is to attract these 2G customers and offer them 4G services. This would accelerate the growth of subscriber addition for Jio but would mean a faster subscriber loss for Vi. In case Vi keeps losing customers to competitors, the telecom market of India would turn into a duopoly sooner than expected, said Jefferies.

Vi has been able to add 4G subscribers, but the pace at which the subscriber addition has happened is very slow compared to Airtel and Jio. Active customers have been continuously leaving the network of Vi, which is surely going to affect the revenues of the telco. Bharti Airtel has been able to add new subscribers every quarter and month, despite an increase in base tariffs.

Even when it came to wireline subscribers in May 2023, Airtel and Jio added new users, while Vi lost users there as well. Vi has not been able to meet the 5G rollout obligations that the government had set. Both Reliance Jio and Bharti Airtel have done so. Adani Data Networks is also yet to meet the rollout obligations. According to some reports, Vi requested the government additional time for the 5G rollout.

Vi won't be able to place a 5G order until the time it manages to raise fresh funds. That will not happen until the promoters put fresh capital into the company. External investors don't seem very excited about the company until the promoters step up and show initiative.