The magic number that Vodafone Idea, Airtel and Jio are chasing is 50

The magic number that Vodafone Idea, Airtel and Jio are chasing is 50

  • VIL lost market share in 14 circles whereas JIO gained market share in these circles.
  • Jio’s revenue market share is at 31.7% which is in striking distance of Vodafone Idea’s 32.2%.
  • CARE recently downgraded VIL’s long-term debt to A- from AA-, with a negative outlook.
What does it mean to be the top telecom service provider in India? The finish line in the race between Jio, Vodafone Idea (VIL), and Airtel is at the halfway mark.

Mukesh Ambani’s Reliance Jio is looking to attain a 50% share in the total telecom sector’s revenue.

The company that brought in predatory pricing is looking to bite off half of the telecom pie, which will probably make it powerful enough to alter the pricing structure of the market.

Whether they will be able to do it or not will be determined in the next four to five quarters, which is when Emkay Brokerage predicts it will achieve it.

Jio’s revenue market share without including national long distance is at 39.8%. Vodafone Idea has a share of 28.9% and Bharti Airtel is at 24% for the fourth quarter. However, when including national long distance, Vodafone is the market leader with Jio close behind.

Vodafone is ceding the most of its territory to Jio. “VIL lost market share in 14 circles which contribute 50% of its total AGR (adjusted gross revenue), whereas JIO gained market share in these circles,” said a recent report on telecom sector by Emkay Brokers.

What’s more worrisome is that Vodafone Idea is losing share in its traditionally strong circles of Mumbai, Tamil Nadu, Uttar Pradesh-East and Andhra Pradesh. These four leadership circles contribute to 28% of the merged company’s revenues.

In the meanwhile, Jio found a niche in B and C circles, like Madhya Pradesh, West Bengal and Bihar amongst others. Not only does it command number one position in the circles, they contribute to more than half of Jio’s revenue. Yet, Jio is not gaining ground as fast as it did, earlier.

“The intensity of RMS gains has decelerated due to slower revenue growth,” Emkay said.

A Negative Outlook

It is this manner of extreme competition which has worried rating agencies too. CARE recently downgraded its long-term debt to A- from AA-, with a negative outlook.

“The negative outlook continues to factor the moderation of operational performance amidst intense prevalent competition in Indian telecom Industry. The competition in the industry has intensified leading to decline in realizations,” CARE said in its report.

Improving Margins

Vodafone Idea however is setting the stage for improving its margin even in an era where prices for 3G data fell drastically since Reliance Jio’s entry. It introduced a minimum recharge plan of Rs 35 for 28 days, and it lost 53 million subscribers in the fourth quarter.

The customers which it lost were those who were using the number for incoming calls only or barely using it. As a result, its average revenue per user (ARPU) went up to ₹104 from ₹89 a quarter earlier.

In spite of small victories, Vodafone Idea is a long way from withstanding the onslaught of Reliance Jio’s aggressive tariffs. And Vodafone’s fate will also depend on when, how it will win the price war.

“The outlook may be revised to Stable in case it is able to withstand the competition in a more resilient manner and demonstrate improvement in operational and financial performance indicators,” CARE said.