Foreign brokerage CLSA has highlighted significant shifts in India’s telecom market dynamics, particularly in the wake of tariff hikes introduced in July 2024. According to the latest report, Bharti Airtel has emerged as the biggest gainer, while Vodafone Idea Ltd (VIL) continues to struggle with subscriber losses and declining market share.
Key Highlights from CLSA’s Telecom Sector Report
- Market Share Dynamics:
- Bharti Airtel gained 180 basis points (bps) in market share over the past 12 months, reflecting its strong performance post-tariff hikes.
- Vodafone Idea, on the other hand, saw a decline of 168 bps during the same period, raising concerns about its long-term sustainability.
- RJio leads with a 41.6% revenue market share, followed by Bharti Airtel at 38.6%, and Vodafone Idea at 14.4%.
- Revenue Growth:
- India’s mobile sector revenue grew 8% sequentially and 14% YoY in Q2FY25, reaching an annualized figure of ₹2,69,100 crore ($32 billion).
- Bharti Airtel posted the highest revenue growth at 10% QoQ and 19% YoY for Q2FY25.
- RJio recorded 8% QoQ and 14% YoY growth, while Vodafone Idea lagged behind with marginal growth during the same period.
- Impact of Tariff Hikes:
- Bharti Airtel’s revenue share gain of 86 bps QoQ, driven by its strong flow-through of the tariff hikes, underscores its pricing power and customer retention strategy.
- Vodafone Idea lost 35 bps QoQ revenue share, reflecting its challenges in retaining subscribers amidst stiff competition.
- Regional Performance:
- Growth in A and B circles was led by Bharti Airtel, which reported 9-12% QoQ revenue growth, outperforming RJio’s 8% QoQ growth in these categories.
Outlook for the Telecom Sector
CLSA projects further market share consolidation, with the top two players, RJio and Bharti Airtel, potentially controlling 84% of the sector revenue by FY27.
- Vodafone Idea’s Challenges:
The telco’s equity fundraise and ongoing discussions for a ₹25,000 crore ($3 billion) debt raise are seen as positive steps. However, CLSA remains cautious about its ability to recover market share amidst its financial struggles.- CLSA has an underperform rating for Vodafone Idea, with a target price of ₹6 per share.
- Bharti Airtel’s Strength:
Bharti Airtel’s consistent growth and market share gains make it a strong contender in the sector. CLSA has given it an outperform rating with a target price of ₹1,860 per share. - RJio’s Leadership:
Despite a slight QoQ dip of 51 bps in revenue share, RJio remains the market leader.
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