Jefferies expects market repair to take another 12 months and VIL’s (revenue) market share (RMS) to slip below 25 per cent over the next 18 months and will require additional funding by FY21. They expect VIL's market share to fall to 21 per cent in FY21 and 20 per cent in FY22.
According to the recent subscription data released by Telecom regulatory Authority of India (TRAI) for February, Reliance Jio has continued to grow, Bharti Airtel has remained stable but VIL has continued to lose subscribers.
“With India's mobile market being a three-player oligopoly and imminent recovery in sector revenues driven by stability in tariffs and rising data adoption, we remain positive on Jio which will emerge as a leading telco in 2019 and also Bharti, given its strong market-share defence and inevitable turn in revenues. However, VIL's out-of-control gearing remains a key concern,” wrote CLSA analyst Deepti Chaturvedi in an investor note.
Airtel is expected to report a net year-on-year loss on Monday when it will announces its March quarter results. However, analysts also expect a steady uptick in wireless revenue as the minimum recharge initiative completes two quarters.
Over the past year, Jio has gained 90 basis points (bps) in active subscriber market, taking its share to 24 per cent. In the same period, while Vodafone Idea lost 50 bps to 37 per cent, Airtel has maintained share at 32 per cent. That said, gap between active and reported subscribers for Jio remains high at 16 per cent, compared to 4-8 per cent for Airtel and VIL.
Despite the slip in market shares, VIL is expected to ramp up margins significantly, compared to peers as the telecom market stabilises over the next few years, even if it is at a lower base. Jio's revenue growth in the last quarter was much slower than the past performance and this might continue as the market stabilises and subscribers seek to consolidate a primary SIM. Hence, there is a strong expectation of improving mobile revenue for both Airtel and VIL, Q4 onwards.
While the telecom operators have been very confident of leveraging their data and content offering to drive the long-term tariff growth, recent reports about their user engagement have not been encouraging. A UBS Survey result shows that about 55-60 per cent of Jio's smartphone users engage with Jio's app, compared to 35 per cent for Airtel and 25-30 per cent for VIL. UBS estimates Jio's RMS at 39.1 per cent as of FY23 compared to 29.8 per cent as of Q3FY19, with Bharti and VIL at 27.9 per cent and 28.4 per cent, respectively.
Comparing the telco apps, Jio and Airtel are almost head to head, with Jio having an advantage on Cricket and Disney, whereas Airtel has a slightly better Hindi entertainment portfolio. Both Airtel and VIL do not have content based average revenue per user (ARPU) models at present, however, Jio is estimated to gain from a free plus premium content through advertising revenues by FY23.