Voda Idea and Airtel lost subscribers during lockdown; analysts cautious

The drop in subscriber base could be a worry, especially for Vodafone Idea, which has seen a continuous drop in its base.

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Airtel and Voda Idea recently faced the wrath of the telecom regulator, which blocked their premium plans that were part of telcos’ plans to expand top lines.
NEW DELHI: Even as data consumption spiked during the lockdown as consumers were forced to stay work, telecom operators lost subscribers during the lockdown, data released by the telecom regulator for March 2020 suggests. Most of the subscriber loss was reported by Bharti Airtel and Vodafone Idea. In all, the industry lost 2.9 million gross subscribers in March (against 4-5 million monthly subscriber additions in the previous two months) to reach a subscriber base of 1.16 billion. Airtel lost 1.3 million subscribers and Vodafone Idea 6.4 million, while Jio added 4.7 million.

“We are certain that the lower addition has been hit by restrictions from mid-March and the nationwide lockdown during the latter half of the months,” Aliasgar Shakir of Motilal Oswal said in a July 14 report. The rise in tariffs also could be a factor, he said.

The drop in subscriber base could be a worry, especially for Vodafone Idea, which has seen a continuous drop in its base. The Adittya Birla-Vodafone Plc joint venture is left with active market shares of 29.7 per cent, against 36 per cent for the year-ago period.


“Voda Idea’s continuous loss of subscribers is majorly due to its sub-par network qualities along with its survival uncertainty, which is hinging on the Supreme Court’s decision to grant an extended moratorium period on the AGR liability,” Shakir said.

Airtel and Vodafone Idea recently faced the wrath of the telecom regulator, which blocked their premium plans that were part of telcos’ plans to expand top lines. An excess of regulatory intervention, net neutrality rules and the extra burden of adjusted gross revenue (AGR) have made life difficult for the telcos, experts said.

“In telecommunication, the value actually has been taken away by people who build something on top of the telecom pipeline rather than those who lay the pipeline and that is unfortunate because all over the world you have net neutrality laws which make sure nobody can charge extra for say streaming a movie or voice call or Zoom chat or whatever,” said Raunak Onkar, Research Head at PPFAS MF.
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And at the same time, if you look at their capex requirements and return ratios of these companies, it is actually not a very great industry to look at, he added.

However, not everyone has a bearish view on telecom companies. Emkay has included Bharti Airtel in its high conviction list thanks to a sustained rise in 4G subscribers and another round of tariff rise, which is expected. It has a target of Rs 684 on the scrip, an upside of 21 per cent from last close, Enkay said in a July 1 note.

Sunil Subramaniam, MD of Sundaram Mutual, said even though Jio has roped in some of the biggest names as investors, it is not that others are devoid of any support.

“I think India is a two or three player market and given the size there is adequate space for all the three to benefit. Yes there will be readjustments of market share but Airtel and Voda Idea also have international backing. Singtel backs Bharti Airtel and Voda Idea is UK backed. India is a big enough market that is why Google has made such a bet (on Jio). So I think the market is large enough for all the three players to benefit,” he said.
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One good thing that works for Voda Idea is that it still has the biggest subscriber base of postpaid users at 23 million. "In our view, the subscriber base of both Bharti and VIL are relatively less price sensitive, making them more amenable to tariff hikes," IIFL Securities said a note released earlier this month.
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