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Some relief, but Vi has an almost impossible path ahead

The telecom revival package may have provided relief to financially stretched Vodafone Idea (VIL), but the telecom player may remain a fragile entity with a declining subscriber base given its inability to catch up with Bharti Airtel and Reliance Jio on network capabilities and service offerings.

“The relief measures may allow VIL to continue as a going concern but absence of relief on balance sheet or profit or loss may rule out any meaningful equity value creation. Moreover, VIL may continue to lose subscribers as it remains behind Bharti and Jio on network capabilities (4G/5G) and service offerings (subsidised handsets, bundled plans, etc). Our calculations suggest that VIL may require Arpus (average realisation per user) of Rs 300-500 at different levels of subscriber base to manage its liabilities even after converting deferred amount to equity post four years of moratorium,” Kotak Institutional Equities said in its report.

The company has been losing customers every month. In fact, of the four telecom operators (including state-owned BSNL), only Vodafone Idea’s customer base declined in the 2020 calendar year.

As per data released by the Telecom Regulatory Authority of India (Trai) for 2020, Vodafone Idea’s wireless subscriber base declined to 284.26 million in December 2020 against 332.61 million in December 2019, decreasing by 14.54%. In contrast, Reliance Jio’s subscriber base rose by 10.47% to reach 408.77 million in December 2020 against 370.02 million in December 2019, while that of Bharti Airtel witnessed a jump of 3.49% to reach 338.71 million from 327.30 million during the reported period. Even state-run BSNL, which has been facing customer churn due to lack of 4G services, managed to marginally increase its subscriber base to 118.71 million in December 2020 compared to 118.21 million in December 2019.

Since the overall wireless subscriber base rose only marginally to 1,153.77 million in 2020 from 1,151.44 million in 2019, a net addition of mere 2.34 million, it means that primarily, customers are merely changing their operators. During 2020, Reliance Jio added 38.76 million subscribers followed by 11.41 million by Bharti Airtel and 590,000 by BSNL. In contrast, Vodafone Idea lost 48.36 million subscribers during the year, indicating that Jio and Airtel got those subscribers.

Due to the steep loss of subscribers, the market share of Vodafone Idea declined to 24.64% in 2020 against 28.89% in 2019. In fact, Vodafone Idea has been losing customers consistently and has now reached the third position in terms of subscriber market share from being the top player when the two companies merged in 2018.

Vodafone Idea has been a laggard on virtually all the fronts. The company’s average revenue per user (Arpu) is the lowest among the three private players and it has not been able to invest in network while losing customers at a very high pace. Financial Express

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