Thursday, September 29, 2022

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say

Must read

Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

  • to trust Jio, airtel and Vodafone idea all reported their Q1 FY23 results.
  • While Jio leads in almost every major statistic, his closest rival Airtel is still fighting.
  • Vodafone Idea has made some modest improvements, but it still has a long way to go to regain financial health.

The Indian telecom market has become a three-way race with only two major players long ago. However, backed by one of the leading Indian conglomerates, Vodafone Idea has languished so badly that its first quarter losses of ₹7,296 crore are more than the profits of the top two players, Jio and Airtel, combined.

In fact, Jio made almost three times more profit than Airtel, despite only having 16% more subscribers than the latter.

Vodafone Idea lost $10 million each day in Q1 FY23 – more than Jio and Airtel’s combined gains.

Airtel, Jio and Vodafone Idea’s Net Profit in Q1 FY23 India / Bloom

While Jio is ahead of the game, the oldest player Airtel is still ahead in margins. Airtel leads the way when it comes to the amount of revenue each subscriber contributes on average (ARPU).

While Airtel has long been the market leader in this field, Jio is catching up quickly, while Vodafone Idea is still far behind.

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say
ARPU of Airtel, Jio and Vodafone Idea in Q1 FY23 India / Bloom

Together, Jio, Airtel and Vodafone Idea have more than 1 billion subscribers – slightly less than the population of the US and Europe combined.

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say
Airtel, Jio and Vodafone Idea subscribers in Q1 FY23 India / Bloom

Jio’s decision to skip the 2G and 3G technologies and jump straight on the 4G bandwagon now helps it reap rewards its rivals can only dream of.

Airtel is its closest competitor in terms of subscribers, profits, ARPU, and other metrics — and yet, despite having nearly 86% of the total subscriber base Jio has, Jio’s 4G subscriber base is more than double that of Jio’s. airtel.

Airtel and Vodafone Idea together have fewer 4G subscribers than Jio – for every four 4G subscribers Jio has, Airtel and Vodafone Idea together only have three.

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say
Airtel, Jio and Vodafone Idea’s 4G subscribers in Q1 FY23 India / Bloom

Why does this matter? For starters, this metric shows how much data each subscriber consumes, and since data services are more expensive compared to voice, this results in higher revenues and profits.

This can be seen in the average data usage data, where Jio dominates with Airtel a close second and Vodafone Idea a very distant third. It’s also worth noting that Airtel and Vodafone Idea numbers only apply to subscribers using data services – this is not true for Jio, as all of its subscribers are on 4G.

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say
Airtel, Jio and Vodafone Idea average data usage in Q1 FY23 India / Bloom

Even in terms of speech, Vodafone Idea is way behind both Airtel and Jio.

Jio, Airtel could emerge stronger and further weaken Vodafone Idea, analysts say
Airtel, Jio and Vodafone Idea average speech usage in Q1 FY23 India / Bloom

The way forward for the telecom sector

Regardless of how telecom players performed in FY22, there is broad consensus among analysts and the telcos themselves that rate hikes are coming – both Airtel and Vodafone Idea have admitted this in their latest phone calls from investors.

“We expect a rate hike of about 15% by telcos in the near term to offset cash outflows in the near term, as most incremental 5G benefits from industrial use cases are still at least two to three years away,” according to a report from ICICI. Straight away.

This is partly due to the fact that the 20-25% increase in November last year has now been fully absorbed and telcos have to increase their ARPUs. The recent 5G spectrum auctions are also another trigger for telcos to raise rates as they seek to offset the large capex spend.

A report from IIFL Securities says that both Trust Jio and Airtel could see a 12% growth in mobile revenue in the first six months of 2023 – the undisputed laggard is Vodafone Idea, which will continue to lose subscribers.

“After the spectrum auction, we expect the relative positioning of the top two telcos – Jio and Airtel – to be further strengthened with increasing churn opportunities for VIL as Jio/Airtel’s service coverage/capacity improves,” added the ICICI Direct- report to it.

Analysts at Goldman Sachs sounded optimistic, saying, “With our expectation of a rate increase before the end of CY22 and the added benefit of a lower SUC (Spectrum Usage Charge) from September ’22, we predict that Bharti’s wireless segment will deliver 22% in FY22 -24E revenue CAGR.”

A Nomura report also said a 4% tariff increase would be enough to cover 5G spectrum gains.

There seems to be a growing consensus that Vodafone Idea will continue to weaken – with Jio and Airtel’s 5G spectrum wins, and Vodafone Idea’s relatively lackluster bids further bolstering this theory.

Over the years, the telecom industry has rapidly consolidated after the arrival of $RELIANCE.NSE Jio. Of 15 service providers, we are left with 4 with a market share of more than 99%. Post Jio’s ARPU (average revenue per user) declined from 300 in 2007 to ₹78 in 2017. $BHARTIARTL.NSE reported ARPUs of ₹183 in Q1FY23, up 2.7% quarter on quarter. In 5 years ARPUs will be back at ₹300. This time they are well balanced with the 5g rollout plans and debt remains reasonable. $IDEA.NSE also saw an improvement in ARPUs over the last 4 Qtrs, at ₹ 128 in Q1FY23, up 23% year over year. Though the losses increase at ₹7295cr in Q1FY23 vs ₹6549cr in Q4FY22. The company is losing market share. How they repay debt and recoup lost ground remains to be seen with the lowest ARPUs of the 3. Jio’s ARPUs were up 24% and the total customer base rose to 419.9 million versus 410 million in the last quarter. Standalone profitability is also up 24% this quarter. In the future, it could become a 2 horse race where Jio & Airtel have the financial clout in this asset-heavy industry.

— (@SOIC) August 10, 2022


Mukesh Ambani is all set to do a ‘Jio’ with green energy

Indian government reportedly plans to restrict Xiaomi, Realme, Vivo and Oppo from budget smartphone segment

VI Bets On Tariff Increase As It Lost More Than $10 Million Every Day In Q1 FY23

More articles


Please enter your comment!
Please enter your name here

Latest article