NEW DELHI: If Reliance’s 2016 foray into telecom marked the beginning of this roller coaster tale, then the release of the second quarter’s financial results cues an intermission of sorts. When Jio entered the market, there were 11 other telecom service firms in India. Four years and a couple of bankruptcies later, Jio stands at the top and only two private sector rivals remain-Bharti Airtel and Vodafone Idea (recently re-branded Vi).
So far, Jio has remained ascendant in most key measures, but the second quarter marks a few crucial shifts. It was the first period since September 2019 where Airtel and Vi did not have to make onerous AGR provisions, paring down losses. Airtel’s quarterly net loss narrowed to Rs 763 crore from Rs 23,405 crore a year ago, while Vi reported a net loss of Rs 7,218 crore versus Rs 50,922 crore.
Jio’s blitzkrieg also slowed down. In fact, Airtel overtook Jio in net subscriber additions during the period (13.9 million vs 7.3 million); saw revenues grow far faster (22 per cent year-on-year vs 5.6 per cent for Jio); and its Average Revenue Per User (ARPU) of Rs 162, a key profitability metric, handily beat Jio’s 145.
But the results also show that only Airtel is catching up. Vi, once India’s largest telco by user-base, has continued to fall behind. While losses narrowed and the telco says it does not need to pay any AGR dues until March 2022 (though government sources say that doesn’t sit well with the Department of Telecom), it doesn’t have much else to take home.
Unlike the other two, Vi’s revenues fell marginally year-on-year in Q2; its EBITDA margin stands at 38.5 per cent versus Airtel’s 46.2 per cent and Jio’s 42.9 per cent; ARPU was only Rs 119; and it continues to bleed subscribers, user base shrinking by 11.8 million in Q2.
Vi’s biggest problem is that it doesn’t have enough cash-cash and cash equivalents fell to Rs 1,430 crore from Rs 3,450 crore at the end of June 2020. Faced with little liquidity, its capital expenditure (capex) has taken a hit. But this is only expected to lead to more subscriber losses as network quality deteriorates. “Its peers continue to invest more in network. In Q2, Bharti added nearly thrice the number of broadband base stations..,” Jefferies’ analysts note.
Vi’s capex rose from around Rs 600 crore in the previous quarter to Rs 1,040 crore in Q2, but it has only spent around Rs 6,700 crore over the past year-Airtel has spent over Rs 16,000 crore. Vi plans to raise Rs 25,000 crore in the next three months, but net debt remains high at around Rs 1,14,500 crore. According to analysts at Emkay Global, Vi is in a position where “a turnaround will not be smooth even if the fundraising is successful”.