Global ratings agency S & P Global expects Bharti Airtel and Reliance Jio Infocomm to gain fewer customers in future from Vodafone Idea (Vi) as it sees the latter emerging a stronger telco with an improved mobile broadband network on the back of its recent Rs 23,000 crore fundraise via the equity route.
The ratings agency also said the telecom industry is set for the next stage of market repair with India’s top two telcos, Jio and Airtel now likely to focus less on market share gains and more on improving profits and bolstering their balance sheets.
S&P Global’s views come on the heels of India’s top private carriers, Jio, Airtel and Vi increasing headline rates recently in a clear bid to boost average revenue per user (ARPU) and drive revenue growth.
“The playing field could become more level now. Vi’s recent equity raising has bolstered its viability, and subscriber growth could slow down for Airtel and Jio if Vi improves its network quality and becomes a more viable competitor,” S & P Global said in an official statement Thursday.
It added that Vi’s recent fundraising actions can provide a respite to the telco’s liquidity pressures and enable it to improve its network quality.
A telecom JV between UK’s Vodafone and India’s Aditya Birla Group, Vi is targeting around Rs 55,000 crore capex over the next three years toward 4G expansion and 5G rollouts in its priority markets. This is vital for Vi to arrest customer losses and compete more effectively with Jio and Airtel, who have already rolled out pan-India 5G networks.
In the afterglow of the recent headline rate hikes that took effect this month, S&P Global expects the operators to report faster ARPU growth, especially after the slowdown on this score over the past 12-to-24 months.
Jio took the lead in increasing mobile tariffs by 12-25% for most of its users, following which, Airtel and Vi also raised rates by 11-20% and 10-23% respectively for their millions of users. This was the first wide-ranging headline price hike since November, 2021.
S&P Global estimates that every Rs 10 increase in ARPU will translate into an annual Ebitda boost of Rs 2,500 crore-plus for Airtel and Rs 3,000 crore plus for Jio. “We project the tariff hikes alone will add at least 5% to Airtel's EBITDA in fiscal 2025, and 10% in fiscal 2026.”
Separately, the global ratings agency ruled out significant spectrum buys in the next 12-to-24 months, saying the telcos were likely to defer purchases till they reap more returns from their 5G businesses.
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