The Indian telecom sector seems to be heading towards a duopoly earlier than expected as Vodafone Idea continues to lose subscribers, while rivals Reliance Jio and Bharti Airtel add users, analysts said.

They said Vodafone Idea (Vi) will survive in the medium term but beyond the first half of 2025-26, survival seems difficult unless the government continues with a large equity infusion and there is a significant increase in ARPU.

The telco lost 2.81 million wireless subscribers in May. On the other hand, market leader Reliance Jio added 3.03 million while Bharti Airtel added 1.32 million new wireless subscribers. 5G rollouts are driving market share gains for Jio and Airtel.

The buzz created by the launch of Jio Bharat, an internet-enabled phone from Reliance Jio, is likely to erode further market share and the number of subscribers of Vodafone Idea.

Jefferies said Vodafone Idea may lose subscribers at an accelerated pace because of the launch of Jio Bharat, leading to a faster shift in the market share in the telecom sector.
By the end of the current fiscal, Jio and Airtel are expected to jointly corner as much as 83 per cent of revenue market share (RMS) at the expense of Vodafone Idea.

Vodafone Idea requires around $8-10 billion capital infusion to strengthen its existing 4G network and launch next-generation 5G. However, despite the government picking up equity in the firm, there has been no positive movement in the fundraising plans.

Vodafone Idea ended 2022-23 with Rs 2.09 lakh crore of net debt and a modest cash balance of Rs 230 crore. Its debt from banks and financial institutions stood at Rs 11,390 crore in the quarter to March 2023. “We believe Vi’s survival is the most likely event until the first half of 2025-26, with some equity infusion from promoters and refinancing of banking debt. However, the company’s fate beyond that period (post-moratorium end) rests with its largest creditor (GoI),” Kotak said in a research report.

“We believe it is in GoI’s best interest to have Vi continue as a going concern, but without continued large equity infusion and a significant increase in ARPU, Vi’s survival appears very difficult beyond 1HFY26, in our view. Furthermore, we note that GoI has committed significant funds to revive public sector telcos (BSNL) in the past few years and could look at them as a more credible third telecom operator than Vi.”

Vodafone Idea opted for a four-year moratorium on payment of spectrum dues as it converted the interest on the moratorium — amounting to Rs 16,000 crore — into equity to be owned by the government, which is about 33 per cent.