As 2018 comes to an end, the Indian telecom market resides at a crucial juncture. Three major players – Reliance Jio, Bharti Airtel and Vodafone Idea – rule the market with around 90 percentage of revenue and 80 percentage of spectrum holding. The market observes aggressive competition and financial apprehensiveness at the industry level, creating a predicament for the players to choose their spectrum of capital allocation.
Currently, the three lead players have substantial differences in their customer base, have strong variations in their performance stances, with some having a stalled revenue and increasing debt. Overall, their balance sheets seem to be elusive. In the year ahead, large-scale investment is inevitable for the players, especially for the spectrum acquisition. There is still the challenge of cost containment and creating profitability at an operating level. For a smooth sail in 2019, each player may have to adopt different strategies and keep separate priorities while serving the Indian market.
After its merger with Idea Cellular, Vodafone India reported a subscriber base of 422 million. The service provider reportedly has a debt of more than 1.20 lakh crore. Post-merger, Vodafone released its first-quarter results recently, announcing revenue of Rs. 7,663.5 crore. It reported a loss of Rs. 4973.4 crore and an ARPU (Average Revenue per User) of Rs. 88 during the quarter. The company has also infused some funds of Rs. 25,000 crores.
For maintaining its financial health, Vodafone has to focus on cost rationalisation and also on raising additional equity. The benefits the player can count are its solid brand and spectrum footprint. With a major customer base under its hood (much higher than its competitors), Vodafone may now require to focus on creating the right customer mix rather than serving all classes at an equal pace. Vodafone may have to focus on carefully allocating the capital to the customer segment that can provide high ARPU to the provider, which also means exiting from category C circles.
Reliance Jio, having a customer base of 252.3 million, seems to be financially robust than its competitors. Among the lead players, Reliance Jio has the lowest debt of Rs. 80,000 crores. Its investment has totalled to Rs. 2.5 lakh crores. Based on the result published in the September quarter, the player reported a net profit of Rs. 681 crore, with a revenue of Rs. 10,901 crores. It announced an ARPU of Rs. 131. 7 per month. Reliance Jio has its focal point at its expansion strategy where it is promoting its fibre launch, which is expected to continue in 2019. 5G is another anticipation from Reliance Jio.
Also Read: Airtel Lost to Jio in Terms of AGR
Bharti Airtel currently has a subscriber base of 343 million. The oldest (two decades of operation) among the lead players have a debt of over 1.13 lakh crore. In September quarter, Airtel reported a revenue of Rs. 20, 423 crores with a net profit of Rs. 119 crores. This is a 65-percentage decrease in its net profit and 6.2 percentage reduction in revenue. The ARPU too fell to Rs. 101. Compared to the other two lead players, Airtel seems to have a different context of financial metrics and requires strong revival strategy to sustain 2019.
However, by all means, cost rationalisation efforts, spectrum liberalisation, the betterment of broadband capacity will be the prime focus for all players in 2019.