telecom | IST

Subscriber losses at Vodafone Idea to benefit Jio more than Bharti, says Fitch Ratings

From industry perspective if Vodafone Idea were to shut shop then industry would definitely suffer in the form of job losses and there would be some repercussions on the tower industry, said Nitin Soni of Fitch Ratings.

Kumar Mangalam Birla at the Hindustan Times Leadership Summit in New Delhi said said they would shut Vodafone Idea if they don't get relief. He said it was important for the government to find a solution for the telecom sector.
Nitin Soni of Fitch Ratings who tracks the telecom space said there is no doubt that Vodafone Idea has been facing lot of challenges with low cash generation amidst shrinking base and they have struggled to pay some of the bank loans which they disclosed in last quarterly results. On top of this the  AGR dues of over Rs 44,000 crore would be a big challenge for Vodafone Idea, he added.
“It will be a real challenge for them to raise such a large amount of money from banks given that they are in financial distress. So we have to see what kind of relief Supreme Court judge in the review petition or the government can provide to the sector, especially when 75 percent of the total amount is interest and penalties and that is the real issue now,” he added.
According to him, any relief will be positive for the telecom sector and especially for Vodafone Idea. "As a rating agency we are conservative and have factored in a full amount that they will pay in the next three months," he added.
Bharti Airtel is rated at - BBB and they are at rating watch negative, said Soni.
With regards to Vodafone Idea, he said, “We believe 25-30 percent tariff hike for them will not be sufficient to recover their cash generation to such a level at which they will start paying their bank loans in a proper manner."
From industry perspective if Vodafone Idea were to shut shop then industry would definitely suffer in the form of job losses and there would be some repercussions on the tower industry including Indus- Infratel, which is in merger stage awaiting regulatory approvals. So their valuation could also beget if Vodafone Idea were to exit given large number of tenancies are with Indus- Infratel, said Soni.
According to him, it would not be in the national interest to have two private telcos and so government may provide some relief to continue having at least three private telcos.
“Jio has a really good momentum right now to gain subscribers. They have been gaining about 6-7 million subscribers. So it’s not as if Vodafone Idea is not losing subscribers at the moment, they are already losing about 4-5 million subscribers a month, but that is not going to Bharti, it is mostly going to Jio's network,” Soni added.
However, in case Vodfone Idea were to rapidly lose market share and come down from 300 million to 100 million subscribers, then Bharti may benefit and the house would revise their forecast for Bharti, said Soni.
Disclosure
: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes CNBCTV18.com.