Vodafone Idea lives to see new day, ending Jio-Airtel duopoly fears

The writing on the wall has changed. The Indian telecom sector is not, after all, becoming an inevitable Reliance Jio-Bharti Airtel duopoly.

Vodafone Idea (Vi) has got a four-year reprieve and it has a fighting chance, provided it concentrates on two key areas: Stemming the month-on-month subscriber loss (it has lost 20 million customers in Q2 to reach 253 million) and ensuring that 55 per cent of its customer base that is on 2G and 3G moves up to 4G. 

Vi’s decision to convert its interest payouts into a substantial 36 per cent equity in the company will help.

But the fact remains, as CLSA points out, that it is not enough for Vi to pay its annual spectrum payouts after a four-year moratorium. Its ARPUs have to go up to Rs 250-300 from Rs 109 at present. If Vi can show serious intent, it could end up altering the strategies of its competitors. For instance, Jio was the chief beneficiary of Vi’s customer losses and has been aiming to hit 500 million customers from the current 427 million.

Analysts say the 500 million mark could become that much harder now, especially as Airtel has been able to keep its market share stable.

With no duopoly, Airtel and Jio will now concentrate on improving their bottom lines rather than playing the pricing game to target Vi customers or ensure its demise. If that happens, it will bring the latter closer to the ARPUs of its two competitors, who are shooting for Rs 200 in the first phase.

But the rumblings are getting louder. For one, the fate of BSNL and MTNL. The government had planned a mega revival package of Rs 70,000 crore in 2019 for them and a lightning entry into 4G to take on the three private companies. Instead, their 4G foray has been hopelessly delayed and their rivals will be selling 5G next year as it slowly loses market share with 145 million customers.

“It’s a serious issue. The government seems to have abandoned its own operator to save one in the private sector. While the government is talking of privatisation, it is itself getting into a private sector. With 36 per cent stake, it can even block special resolutions in the company,” said an analyst.