Vodafone Idea, Airtel worst hit; Jio is the winner
MUMBAI: The industry-wide subscriber base of the telecom sector declined month-on-month by 2.8 million and 8.2 million in March and April 2020, respectively, according to an India Ratings & Research (Ind-Ra) report recently.
The decline was attributable to a reduction in the subscriber base of Vodafone Idea Ltd (VIL) and Bharti Airtel Ltd, which has more than offset the growth in the subscriber base of Reliance Jio Infocomm Ltd.
Ind-Ra believes that the impact is due to the lockdown imposed after the outbreak of COVID-19 towards end-March 2020 and continued for the full month of April 2020. The agency believes the addition in subscriber base would remain under pressure in the coming months due to COVID-19.
Decline in broadband subscriber base
The broadband subscriber base also declined by 11.1 million in April 2020, the first month of decline in the last two years. Though the proportion of broadband subscribers in the overall subscriber base has grown significantly in the last two years, the proportion dipped marginally to 57 per cent in April 2020 from 58 per cent in March 2020, owing to the lockdown.
Broadband subscribers stood at 657 million of the total subscriber base as of April 2020, representing 57 per cent of the total subscribers compared with 545 million in March 2019 (47 per cent) and 395 million in March 2018 (33 per cent).
Tariff hikes support revenue growth in Q4
The tariff hikes by all telcos in December 2019 resulted in the 11 per cent QoQ growth in industry-wide revenue to Rs402 billion in Q4,FY20, as per The Telecom Regulatory Authority of India data.
Ind-Ra believes that the momentum in revenue growth needs to be monitored, as besides tariffs, it is susceptible to movements in subscriber base, which declined in March and April 2020.
Supreme Court Ruling on AGR
In the recent hearing on July 20, 2020, the court has directed that no self-assessment will be allowed. The amount determined by the Department of Telecom (DoT) is final. The apex court has however reserved its order for the staggered payment request by the DoT.
In March 2020, the DoT filed an application in the Supreme Court requesting an elongated timeframe for telcos to repay the dues. While RJio has already paid the dues to the DoT, Ind-Ra believes that Bharti Airtel has the liquidity to pay the remaining AGR dues, if required to be paid in one go, whereas VIL is the worst hit by the ruling, since it has placed the near-term liquidity of the telco in severe stress.
