Vodafone Idea Spends Twice as Much as Airtel on Dealer Commissions: Jefferies
Vodafone Idea's dealer commissions stood at 8.2 percent of sales in FY26, around twice Airtel's level, but Jefferies expects the cost to decline as Vi expands its network and lowers customer acquisition costs.
Vodafone Idea (Vi) is spending significantly more on dealer commissions than Bharti Airtel as it looks to support subscriber additions and defend its market share, according to a Jefferies report. However, the brokerage expects Vi’s dealer commission burden to moderate as its network coverage improves.
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Key Highlights
Vodafone Idea's dealer commissions stood at 8.2% of sales in FY26, around twice Airtel's level.
Vi's dealer commission per gross subscriber addition was 28% higher than Airtel's, according to Jefferies.
Jefferies links Vi's higher customer acquisition costs to its network gap and efforts to defend market share.
Jefferies expects Vi's dealer commissions to decline to 6.5% of sales by FY29 as network coverage improves.
Vi's network size is estimated to increase by around 30% to 262,000 sites by FY29, supporting subscriber acquisition.
Jefferies said Vodafone Idea’s dealer commissions stood at 8.2 percent of sales in FY26, around twice the level of Bharti Airtel. The higher spending reflects the challenges Vi has faced in customer acquisition amid a network gap with its larger rival.
Vodafone Idea’s dealer commissions have increased considerably over the past few years. According to Jefferies, dealer commissions rose from 3.5 percent of sales in FY22 to 6.7 percent in FY23 and 8.4 percent in FY24. They then moderated to 8.1 percent in FY25 before rising to 8.2 percent in FY26.
The increase has also contributed to higher selling and marketing (S&M) expenses at the telecom operator. Vi’s S&M costs increased from 7.7 percent of sales in FY22 to 10.5 percent in FY26. Jefferies said the sharp rise in dealer commissions may reflect Vodafone Idea’s effort to control elevated subscriber churn.
Jefferies said Vi’s higher customer acquisition costs reflect its network gap relative to Airtel, which has compelled the operator to raise dealer commissions to defend market share.
The difference is also visible when dealer commissions are measured against gross subscriber additions. Jefferies said Vodafone Idea’s dealer commission per gross subscriber addition is 28 percent higher than Bharti Airtel.
In FY26, Vi’s dealer commission per gross subscriber addition stood at 396, compared with 310 for Bharti Airtel’s standalone operations, according to Jefferies’ estimates.
The higher spending comes as Vi continues to expand its network. Vodafone Idea’s network capex increased from Rs 18.5 billion in FY24 to Rs 108 billion in FY26.
Jefferies said these investments helped the company expand its broadband coverage by 19 percent and its broadband base stations by 31 percent over FY24-FY26.
Jefferies expects the situation to improve as Vodafone Idea expands its network coverage. Better coverage could reduce the need for elevated dealer incentives and lower customer acquisition costs.
The brokerage expects Vi’s dealer commissions to decline from around 8 percent of sales in FY26 to 6.5 percent by FY29 as improving network coverage supports lower customer acquisition costs.
This reduction is among the factors expected to support Vodafone Idea’s margin expansion. Jefferies forecasts Vi’s cash EBITDA margin to expand by around 840 basis points to 29 percent over FY26-FY29, driving a 25 percent CAGR in cash EBITDA during the period.
Network Investments Key to Vi’s Subscriber Turnaround
Jefferies expects Vodafone Idea’s network investments to support both subscriber acquisition and retention. The brokerage estimates Vi’s network size could increase by around 30 percent to 262,000 sites by FY29.
This expansion is expected to help gross subscriber additions rise 12 percent, from 91 million in FY27 to 102 million by FY29. Jefferies believes that improving network coverage and the overall experience should help Vi attract more subscribers, particularly in areas where its network has historically been weaker.
As network coverage improves, Jefferies expects Vodafone Idea to have greater scope to reduce dealer commissions, supporting lower customer acquisition costs and margin expansion as the operator progresses with its network-led turnaround.
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FAQs
Why are Vodafone Idea's dealer commissions higher than Airtel's?
Jefferies said Vi's higher customer acquisition costs reflect its network gap with Airtel, which compelled the company to raise dealer commissions to defend market share.
How much does Vodafone Idea spend on dealer commissions?
Dealer commissions stood at 8.2% of Vi's sales in FY26, which Jefferies described as around twice Airtel's level.
Are Vodafone Idea's dealer commissions expected to decline?
Yes. Jefferies expects dealer commissions to decline from around 8% of sales in FY26 to 6.5% by FY29, supported by improving network coverage and lower customer acquisition costs.
How is Vodafone Idea expanding its network?
Jefferies estimates Vi's network size could increase by around 30% to 262,000 sites by FY29, which it expects to support higher gross subscriber additions.
How could lower dealer commissions benefit Vodafone Idea?
Lower customer acquisition costs are one of the factors Jefferies expects to support Vi's margin expansion. It forecasts the company's cash EBITDA margin reaching 29% by FY29.
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