InvestorQ : Is it true that Vodafone may be losing its market share rapidly to Bharti and to Reliance Jio?
Archita Jajjoo made post

Is it true that Vodafone may be losing its market share rapidly to Bharti and to Reliance Jio?

Niti Shenoi answered.
2 years ago

It is not only true but each month the data is only corroborating that view point. Vodafone Idea is clearly losing competitive position due to an incessant reduction in subscribers. That is due to low investment in network and rising debt, but clearly most subscribers are not happy with the experience and prefer to sign up with one of the two leaders.

For the Sep-20 quarter, Vodafone Idea reported a net loss of Rs.7218 crore but what was really the sore point was that the subscriber base declined by around 4 crore on a yoy basis to 27.98 crore. This is at a time when Jio has already become the first operator outside of China to cross the 40 crore subscriber mark.

To add to all these problems, it is sitting on a mountain of debt to the tune of Rs.115,940 crore and this is over and above the statutory liabilities of Rs.65,440 crore which it needs to pay to the DOT over a period of next 10 years.

AGR extension is at best a short-term breather because the very survival of Vodafone Idea hinges on quick capital infusion and tariff hike. Both look like tough choices for the company as paying Rs.6,000 crore per year is still going to be a tall ask.

The board of Vodafone Idea has already approved fund raising of Rs.25,000 crore but the biggest challenge for the company is equity dilution that puts limits on price performance of the stock.

Vodafone has a weak cash position of just around Rs.1720 crore and to add to that it is losing competitive positioning with the continuous subscriber churn. Due to monetary constraints, it cannot invest in networks and that is increasing the exit of customers. It is like a Catch 22 for Vodafone.

Persistent subscriber losses and muted capital expenditure clearly imply that the bottom is some time away on network quality and ability to hold on to market share. Hence it is unable to translate even higher ARPUs into higher profits in the business. Subdued capex is only going to put Vodafone at a further disadvantage versus its competition.