The delayed tariff hikes will influence each profitability and revenues for the telcos, it stated.
Vi’s wants funds to spend money on growing 4G protection and 5G rollout, it stated, warning that not investing will result in additional erosion in market share.
Vodafone Idea or Vi stares at a bleak future, together with the opportunity of “shutting store” due to factors triggered by heightened competition, a domestic brokerage said on Monday. It also expects telecom companies to start hiking tariffs only after the general elections in June 2024 amid inflation staying above the RBI’s upper tolerance level.
In the absence of the price hikes, Vi will not be able to keep up with the investments required and launch 5G services, which will lead to an erosion of subscribers and make the planned capital raising exercise difficult, the report by Kotak Institutional Equities said. The long-feared prospect of a “duopoly”, with solely Reliance Jio and Bharti Airtel remaining within the fray, is more likely to play out, the report stated.
The brokerage stated it now expects telcos to begin tariff hikes solely after the conclusion of the final elections in June 2024 and added that components contributing to the prospect embody headline inflation staying above the RBI’s consolation band and state elections.
At current, the deep-pocketed Jio’s renewed aggression is being matched by Airtel, as each the telcos search to garner premium subscribers, it stated, including Jio’s new household postpaid plans successfully caps month-to-month outgo at Rs 205-235 per thirty days for patrons, and would seemingly delay the prospects of a tariff hike and 5G monetisation.
“A delayed tariff hike whereas adverse for the sector would harm Vi’s survival hopes probably the most, and will successfully result in a duopoly,” it said.
Vi’s needs funds to invest in increasing 4G coverage and 5G rollout, it said, warning that not investing will lead to further erosion in market share.
“According to our estimates, Vi stares at a cash shortfall of Rs 5,500 crore over the next 12 months and a delay in tariff hike/fund-raise, could lead to Vi shutting shop,” it stated.
The brokerage additionally suspended the ranking on Vi, making it clear that given a big debt of over Rs 2.3 lakh crore, which continues to rise, and additional potential giant dilution in market share, the fundraising would “stay an uphill battle”.
Lots of voices have been flagging concerns about a potential duopoly in the sector, which has seen exits by many players in the last decade or so. Vodafone and Aditya Birla Group’s Idea merged in the face of the challenging market and has been going through choppy waters. The brokerage report said Airtel is already at a premium to Jio on the headline prices in most packs, and taking a unilateral tariff hike as it did on minimum recharge packs recently seems “difficult” going ahead.
The delayed tariff hikes will influence each profitability and revenues for the telcos, it stated. The Vodafone Idea scrip closed 3.67 per cent down at Rs 6.04 apiece on the BSE on Monday, as in opposition to features of 0.22 per cent on the benchmark.
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