Jio, Airtel to continue increasing revenue market share at Vi’s expense, say analysts

Reliance Jio and Bharti Airtel will see their revenue market share (RMS) growth accelerating in coming quarters due to loss-making rival Vodafone Idea’s inability to invest adequately in 4G networks, analysts say.

RMS is a measure of overall telecom market leadership.

According to Jefferies, Jio and Airtel between them command 72% RMS, having clocked 60 basis point (bps) and 120 bps on-year gains in the June quarter, taking their revenue share levels to 38% and 34%, respectively. During the same time period, Vodafone Idea (Vi) lost another 180 bps, reducing its RMS to a modest 19%.


Analysts expect Vi’s stretched balance sheet to hasten the pace of revenue share shifts towards Jio and Airtel. Any potential relief measures from the government would also work to the top two telcos’ advantage as incremental cash flows for Vi would be channelled to repay regulatory dues and not into fresh 4G capex, they said.

“If Vi continues to be unable to adequately invest in its network, then (revenue) market share gains for Bharti/Jio will continue, and any form of relief from the government would be an added positive for Bharti and Jio,” Jefferies said in a note seen by ET.

Airtel, Jio and Vi have sought relief from the government, calling for reduced telecom levies, longer spectrum lease tenures, and easier payment terms for statutory dues to improve the financial health of the debt-laden telecom sector.

Goldman Sachs estimates that “Vi needs $9.5 billion of capital over the next four years to arrest revenue market share erosion”.

This is a tall order since Vi is yet to close its targeted Rs 25,000 crore funding, which could lead to a $3.1 billion cash shortfall for the company, amid stiff upcoming payouts towards non-convertible debenture (NCD) redemptions, AGR dues, spectrum purchases amongst others.

Jio and Airtel reported 4% and 2% sequential revenue growth in the April-June period, while Vi’s revenues fell nearly 5% on quarter. Vi’s June quarter revenue, in fact, was its lowest in over two years.

Though aggregate revenue growth for the top three operators moderated to 1% sequentially in the April-June period due to lockdowns, Jefferies expects telecom sector growth to pick up from the current quarter, propelled by recent tariff hikes by Airtel and Vi, although the next round of price hikes may be delayed with Jio likely to continue chasing customers after it launches its mass-market 4G smartphone, JioPhone Next – developed with Google -- in September.

Analysts said under-investment by Vi in its network has already resulted in Airtel increasing its lead on broadband base-stations from 61,000 in the April-June 2020 quarter to 215,000 in the quarter ended June 2021. The phenomenon has resulted in Airtel adding 46 million 4G users over the past four quarters against Vi’s 8 million, resulting in market share gains for the Sunil Mittal-led telco.

Nitin Soni, senior director at global ratings agency Fitch, said Vi’s modest Rs 940-crore network capex in the June quarter, if annualised, translates to only Rs 3,760 crore or around $500 million. This is way too low to even maintain its 4G network or compete effectively with Airtel and Jio, given that the latter two are each investing over $3 billion in network capex annually, he said.

Without early funding closure, Vi would continue losing customers and cede more revenue share to Jio and Airtel as lower network capex amid rising data traffic consumption would worsen user experience, analysts said.