In a recent research note, BNP Paribas expressed concerns over Vodafone Idea's ability to defend its market share due to a significant difference in capital expenditure (capex) between the telecom operator and its rival Bharti Airtel. Over the past three years, Vodafone Idea's capex amounted to Rs 120 billion, while Bharti Airtel invested a substantial Rs 496 billion during the same period.
BNP Paribas highlighted (via ET Telecom) that Bharti Airtel, under the leadership of Sunil Mittal, has been actively reinforcing its network through rural expansion initiatives and the rollout of 5G services. Notably, the telecom company achieved the highest quarterly tower additions, amounting to 12,000 in 4QFY23, representing a 16% year-on-year increase in total sites. Additionally, the mobile base transceiver stations (BTS) installed by Airtel witnessed an 11% year-on-year growth. In contrast, Vodafone Idea's tower and BTS additions have remained relatively stable on a quarterly basis, a trend that has persisted since the previous year.
During the fourth quarter of FY23, Airtel's mobile service capex remained elevated at Rs 66 billion, marking a significant 2.6-fold increase compared to the previous year. On the other hand, Vodafone Idea's capex declined by 50% year-on-year to Rs 5.6 billion in 4QFY23. The research note suggests that Vodafone Idea likely prioritized vendor and bank payments during this period.
Airtel's Capex to Rise Further in FY24
Airtel anticipates that its capex will remain elevated for FY24, gradually reducing from FY25 onwards as the company aims to complete its rural expansion and 5G rollout by the end of FY24, according to BNP Paribas. Despite the overall industry slowdown, both Airtel and Jio managed to gain revenue market share at the expense of Vodafone Idea, which saw its market share erode to below 20% by March 2023.
As Bharti Airtel continues to invest in network expansion and 5G deployment, the stark contrast in capex between Airtel and Vodafone Idea raises concerns for the latter's ability to defend its market share.