Reliance Jio may eat into Vodafone-Idea, Airtel customer bases, says report

By: | Updated: January 25, 2019 7:38 AM

Pricing recovery of the telecom sector is not likely to happen in FY20 even as Reliance Jio will further strengthen its dominance by seizing market share, both in terms of subscribers and revenue, from incumbents Vodafone Idea and Bharti Airtel.

India Ratings and Research, reliance jio, Pricing recovery in telecom sector, telecom sector,Pricing recovery in telecom sector not likely in FY20: Ind-Ra

Pricing recovery of the telecom sector is not likely to happen in FY20 even as Reliance Jio will further strengthen its dominance by seizing market share, both in terms of subscribers and revenue, from incumbents Vodafone Idea and Bharti Airtel.

India Ratings and Research (Ind-Ra) has maintained the negative outlook on the telecom sector for FY20. Jio will increase its revenue market share (RMS) to 37.9% while that of Vodafone Idea will come down to 28.9% and Airtel’s share will shrink to 27.8%. As of FY19, Vodafone Idea and Airtel are expected to have a revenue market share of 31% whereas Jio’s share is likely to be 32%.

Not only revenue share, Jio has been consistently improving its subscriber market share as well. The latest entrant is expected to add 10 million customers per month in H2 of FY19 and 7 million per month in FY20. “Large portion of incremental subscribers could come from Vodafone Idea and Bharti Airtel,” India Ratings said.

Ind-Ra expects Reliance Jio’s dominance to increase as it would continue to seize market share in terms of both subscribers and revenue from Bharti Airtel and Vodafone Idea in FY20 and could eventually emerge as the largest telecom player in the industry.

READ ALSO | Yes Bank names Deutsche Bank’s Ravneet Gill as new MD, CEO; posts fall in Q3 net profit

The overall subscriber growth will, however, remain muted in FY20, or it could even witness a decline, as India is a dual-sim market, which could consolidate with ARPUs (average revenue per user) trudging upwards. The ARPU is likely to improve over H2FY19-FY20 as the minimum recharge plans launched by Airtel and Voda-Idea will weed out low ARPU customers.

“The focus of operators will eventually shift to ARPU from subscriber market share,” Ind-Ra opined. The share of 4G subscribers that offers higher ARPU will be a critical profitability indicator and RMS will evolve accordingly. Revenue growth would be uneven across telcos and RJio is positioned to outperform peers with its superior offerings.

The ratings agency feels that given the continued capex commitments, refinancing requirements would remain high for all the players and free cash flows would remain negative in FY20.

The aggregate net debt of Airtel, Vodafone Idea and Jio at end-FY19 is estimated to be around `3 lakh crore, implying net leverage of over 6x for the sector. “Telcos will continue to require equity infusion and asset monetisation to deleverage,” Ind-Ra said.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition