Vodafone Idea Survival Crucial for India, Collapse Could Overburden Airtel, Jio

Aanalyst told TelecomTalk that Vodafone Idea survival is “crucial” for the market to “maintain healthy competition, availability of options for subscribers to choose from, and avoid duopoly.”

HIGHLIGHTS

  • 2G market share to decline to 3.5% by the end of 2025.
  • Monthly data usage to touch 14.7GB in 2025, up from 9.2GB in 2020.
  • Analyst believes a possibility for additional investments from Jio, Airtel to accommodate Vi users.

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Vodafone Idea

The telecom market in India will be “falling into duopoly” with Bharti Airtel and Reliance Jio “sharing the subscriber market share among themselves” if Vodafone Idea does collapse, says Kantipudi Pradeepthi, research analyst at GlobalData. Pradeepthi said that the country till now has the “lower and cheapest mobile data plans around the globe” largely “due to the launch of Jio in 2016.” The research analyst at GlobalData believes that “there could be a chance for an increase in tariffs in the mobile plans by these remaining two players” if Vodafone Idea does shut down its operations.

Vodafone Idea Survival Crucial for India

Pradeepthi highlighted that Airtel has already tweaked its postpaid plans for its enterprise users in July. The GlobalData research analyst said that the second largest operator in India also “adjusted offers to retail customers in order to persuade them to upgrade to higher-priced plans.”

“The primary objective is to improve average revenue per user (ARPU),” Pradeepthi, research analyst, telecoms market data and intelligence at GlobalData, told TelecomTalk in an email interview. “It is crucial for Vi to be in [the] market to maintain healthy competition, availability of options for subscribers to choose from, and avoid duopoly.”

In mid-August, Vodafone Idea, the third-largest wireless operator in India, announced its first-quarter results, with the operator recording a 4.7% decline in its quarter-on-quarter revenues. Ravinder Takkar, chief executive officer at Vodafone Idea in the first-quarter earnings call, said that the operator has continued to “remain in active discussions with potential investors” for fundraising. Additionally, Takkar also said that the hike in tariffs “remains critical to revive the sector” and that the floor pricing is “critical and necessary to improve the overall health of the industry.”

Crucially, the CEO at Vodafone Idea highlighted that its 4G coverage has “already crossed the benchmark of 1 billion Indians” in the past year.

“The fallout of Vi could overburden Airtel and Jio,” Pradeepthi said. “There is a higher chance towards Airtel as Jio has only 4G infrastructure. We believe that there could be a possibility of additional investment by these two players to expand the Indian telecom infrastructure for accommodating Vi customers.”

JioPhone Next to Accelerate Switch to Smartphones

GlobalData, in a report in late April, said that the mobile data service revenue is set to record a 14.7% compound annual growth rate between 2020 to 2025. The data and analytics company said that the mobile data service revenues are “expected” to increase from US$6.3 billion in 2020 to US$12.5 billion in 2025. GlobalData highlighted that the increase in mobile data service revenue would largely be “driven by the continued rise in smartphone subscriptions and the subsequent surge in mobile data consumption.”

With Jio scheduled to launch its JioPhone Next in early September, Pradeepthi said that the operator would release its smartphone with “free data plans” to “undercut the competition.”

“We believe that the strategy will hasten the transition from feature phones to smartphones, allowing more Indians to access the internet,” Pradeepthi said.

According to the report released by GlobalData in April, the penetration of mobile internet subscriptions will rise from an “estimated” 47.3% in 2020 to 81.4% by the end of 2025. The firm said that the increase is due to the “heavy investment in telecom network development across remote areas in the country.”

It was also said that Reliance Jio would “retain its leading position through 2025” and that the 2G subscription share will decline to 3.5% by the end of 2025 from 36.5% in 2020.

“With regard to 2G network, Airtel maintains that 2G services have been generating significant revenues, and it does not plan to shut down its 2G networks in the near future,” Pradeepthi said. “However, the transition of 2G users to 4G services will definitely gain momentum with the availability of affordable 4G smartphones.”

Additionally, the report said that the monthly data usage on average would rise from 9.2GB in 2020 to 14.7GB in 2025. The firm said that the increase in the monthly data usage would be driven by the “consumption of bandwidth-heavy services like mobile video and social media on the mobile network.”

“With the impending launch of the low-cost smartphone, Jio is expecting to trigger the upgradation of India’s over 400 million 2G users to 4G network, especially in rural areas where Jio has already been investing in the expansion of 4G network coverage,” Pradeepthi said.

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Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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