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Vodafone-Idea (VIL’s) broad-based market share loss indicates that market share gains would continue to benefit Reliance Jio/ Bharti Airtel (Jio/Airtel) in the near term till VIL completes its network investments, market research firm Jefferies has said in a report.
“Convergence in growth of Airtel/Jio is likely to keep pricing disciplined since tariff differential is not adding to growth differential. We expect sector revenues to grow at a 14 per cent CAGR to $38 billion over FY24-26 with market share gains for Airtel/Jio, and reiterate our favourable stance on Bharti Airtel/Hexacom,” it said.
During the second quarter this fiscal year (2QFY25), annualised sector revenues continued to scale up to a new peak of $32 billion, along with sector revenue growth accelerating to 13 per cent year-on-year (Y-o-Y), aided by partial flow-through of tariff hikes undertaken in July this year, Jefferies said in the report.
Despite average subscriber growth moderating slightly to 1.5 per cent Y-o-Y, average revenue per user (ARPU) growth of around 12 per cent Y-o-Y resulted in the acceleration in revenue growth. Metros (+7 per cent Y-o-Y) lagged on growth vs A-circles and B-circles (+13 per cent Y-o-Y) and C-circles, which grew 15 per cent YoY. While active subscribers declined in Metros (-0.1 per cent), A-circles witnessed sub-1 per cent growth and B and C-circles saw 2-3 per cent growth. While ARPU growth was 11-13 per cent YoY for A/B/C-circles but 7 per cent YoY for Metros, the report said.
During 2QFY25, Airtel reported the highest growth at 17.6 per cent Y-o-Y, driven by ARPU growth (+15 per cent YoY). Jio’s revenue growth, though slower than Airtel’s at 14 per cent Y-o-Y, was still higher than the sector’s and was led by ARPU (+8 per cent Y-o-Y).
“Given the tariff hikes undertaken in July, we believe ARPU growth will remain strong. Airtel’s and Jio’s growth of 14-18 per cent YoY is robust considering only partial flow-through of tariff hikes. VIL’s net revenues grew 2 per cent YoY — the fourth straight quarter of growth — despite continued subscriber losses (9 per cent Y-o-Y decline in average active subscribers),” Jefferies added.
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