Mumbai: Reliance Jio continued to eat into the market share of entrenched players like Vodafone-Idea (VIL) and Bharati Airtel. VIL has lost its share in all circles for the second consecutive month while Airtel lost its share in 15 out of 22 circles. The sole beneficiary of this was Jio, which gained in 21 circles.
According to analysts, Jio has captured market share at the expense of VIL and smaller operators.
However, Airtel has been able to somehow defend its turf by managing to hold its share at 27 per cent. Experts believe that the Sunil Mittal-owned firm may be able to defend its position, backed by its network investments, strong value proposition and a strong balance sheet, especially after the recent rights issue.
Talking about Airtel, Morgan Stanley said, “the implementation of the minimum recharge plans sometime in the Dec-2018 quarter led to a total subscriber loss of 50 mn (in Q3FY19 and Q4FY19), due either to SIM consolidation or subscriber churn. Management believes the bulk of the impact is now past, and that a large part of the ARPU (average revenue per user) uptick has been driven by this factor. While downtrending on tariff plans has abated, some of it may continue even while the company witnesses migration of voice subscribers to bundled data plans, which is ARPU- accretive.”
Many analysts believe the first quarter could be steady and unexciting for the wireless players.
Even as like-for-like pricing has been stable for the past few quarters, incumbents continue to see a net negative impact of consumers trading up and trading down on the ARPU axis. Q1FY20 does not enjoy any sequential revenue uplift from minimum recharge construct either, unlike Q4FY19, said Kotak Securities in a report.
The brokerage expects a steady quarter with Bharti reporting a modest 1.6 per cent quarter-on-quarter growth in wireless revenues and VIL reporting a flattish revenue print, largely on the back of higher number of days in the June quarter versus March.
“In summary, a calm quarter on the wireless revenue front – ‘better’ as the declining trend of H2CY16-H2CY18 seems to be behind but still ‘bad’ as the stretched balance sheets continue to need sharp improvement in profit & losses,” the Kotak Securities said.
The telcom minister has sought a relief pack for telcos in the upcoming Budget, and a cut in the GST rate from 18 per cent to 12 per cent, which, analysts think, can help lower the monthly mobile bill of consumers.
“Given the higher gearing, high cash burn of the sector, we see room for some relief to be given to the sector. However, we do not expect anything immediate in the upcoming Budget,” said Bank of America Merrill Lynch in a note, adding, “For instance, the decision of GST cut (as stated in media), has to be outside the Budget as the decision needs to be taken in the GST Council. Similarly, decision to decline licence fee/SUC etc could be taken post the minister appointed committee comes with its conclusions. With the government keen to auction 5G spectrum in future, we believe they need to help the sector, to improve the financial health of the sector so that they could participate in future auctions.”
