Voda Idea gets Nuvama upgrade, but Bharti Airtel remains in numero uno spot. Here’s why
Bharti Airtel retains the numero uno spot among the trio, which also comprises the largest play in Reliance Jio Infocomm.
Nuvama Institutional Equities which finds the sector at an inflection point opines that it will likely benefit from a chain of events including fund infusion in debt-ridden Vi, the likelihood of tariff hikes by operators, and government support.
VIL’s FPO of Rs 18,000 crore is one of the largest fundraisers in the history of Indian capital markets and will be followed by the proposed debt raise of Rs 25,000 crore. This could enable Vi to break out of the vicious loop of high debt, lower capex, inferior network quality, and subscriber loss, Nuvama said in a note. As a result of the above factors, the company is suffering lower EBITDA and lower cash flow.
The company has been losing subscribers for 23 quarters now.
Liking the telecom sector to value triangle with three stakeholders viz. operators, subscribers, and regulator, Nuvama said that, operators in the last couple of decades have ceded their share of the triangle first to the government with high spectrum auction price since 2010 and then to subscribers with a price war with the entry of Jio in 2016. The average revenue per user (ARPU) has hit a rock-bottom level, since 2016, it argued.
With the next logical step being a tariff hike for Vi, Nuvama expects Airtel and Jio to follow suit leading to the jump in ARPU, profitability, cash flows, and returns profiles of these operators.
The tariff hike is estimated at 10% in Q2FY25 and
