S&P Global, a global ratings agency, expects Bharti Airtel and Reliance Jio Infocomm to lose customers to Vodafone Idea (Vi) in the future, as the latter emerges as a stronger telco with an improved mobile broadband network following its recent Rs 23,000 crore equity fundraise.
The ratings agency also stated that the telecom sector is poised for the next stage of market repair, with India's top two telcos, Jio and Airtel, expected to focus on raising earnings and strengthening their balance sheets rather than increasing market share.
S&P Global's opinions follow the recent increase in headline prices by India's leading private operators, Jio, Airtel, and Vi, in a clear push to enhance average revenue per user (ARPU) and boost revenue growth.
"The playing field might suddenly be more even. Vi's latest stock raise has increased its viability, and subscriber growth for Airtel and Jio may decrease if Vi improves network quality and becomes a more viable rival, according to an official statement issued Thursday by S & P Global.
It said that Vi's recent fundraising efforts can alleviate the telco's cash concerns and allow it to improve network quality.
Vi, a telecom joint venture between Vodafone UK and India's Aditya Birla Group, plans to invest around Rs 55,000 crore over the next three years on 4G growth and 5G rollouts in its key markets. This is critical for Vi to reduce client losses and compete more effectively with Jio and Airtel have already launched pan-India 5G networks.
In the aftermath of the recent headline rate rises that went into effect this month, S&P Global anticipates operators to report stronger ARPU growth, particularly following a slowing in this score during the previous 12-to-24 months.
Jio led the way in boosting mobile charges by 12-25% for the majority of its subscribers, followed by Airtel and Vi, who hiked rates by 11-20% and 10-23%, respectively, for their millions of consumers. This was the first significant headline price increase since November 2021.
S&P Global predicts that every Rs 10 improvement in ARPU results in an annual Ebitda gain of Rs 2,500 crore or more for Airtel and Rs 3,000 crore or more for Jio. "We estimate that Airtel's EBITDA in fiscal 2025 and 2026 will increase by at least 5% and 10%, respectively, due to the tariff hikes alone."
The global ratings agency also said that major spectrum purchases by the telecoms in the next 12 to 24 months were unlikely, as they would likely wait to make these investments until they saw greater profits from their 5G ventures.
