Vi may miss 5G business share in India due to fund crisis

Vodafone Idea (Vi) may be behind Reliance Jio and Bharti Airtel in the deployment of 5G network across the country, resulting into loss of more mobile customers to rivals.
Vi 4G network in Bhopal
Some industry sources believe that Vodafone Idea may be following the footsteps of Vodafone Group, one of its JV partners. Vodafone Group was not aggressive in the 5G business in the initial phase of 5G roll outs as compared with its rivals in Europe.

But some analysts believe that Vi will not be spending on the 700MHz spectrum, and will buy 3.5GHz in specific circles only, instead of nationwide.

They feel that Bharti Airtel and Reliance Jio would gain from Vi’s market share due to its minimal Capex for 5G deployment.

Vodafone Idea’s mobile customer base fell to 258.446 million in May 2022 as compared with259.206 million in April 2022, according to telecom statistics from TRAI. On the other hand, Reliance Jio enhanced the number of 4G subscribers on its LTE network to 408.787 million from 405.676 million. Airtel enhanced customer base to 362.175 million from 361.147 million.

Vi, according to Department of Telecommunications’ (DoT) notification on spectrum auction in India, has submitted an earnest money deposit of Rs 2,200 crore for participating during the auction. This is in comparison to the EMD of Rs 5,500 crore by Airtel and Rs 14,000 crore by Reliance Jio.

Report from Nomura said nil spectrum usage charges had boosted Vi’s participation in the 5G auctions. Nomura notes that while Vi will bid for 22*50MHz of spectrum pan-India in the mm wave band, it will bid for a minimal amount of spectrum in the 3.5 GHz only in specific circles, namely, the top metros and Circle A and Circle B. This accounts for 95 percent of Vi’s access revenue. Both, mm wave and 3.5 GHz are crucial bands for 5G deployment.

Jio and Airtel would bid for a substantive amount of spectrum in both mm wave and 3.5 GHz bands pan-India to ensure better 5G deployment. Airtel remains well positioned to compete against Jio in the upcoming 5G roll-out. Airtel and Jio’s market share gains could accelerate further at Vi’s expense, and the Indian telecom market could become a virtual duopoly, Nomura report said.

Adani is unlikely to bail out Vi through a potential merger in the future thanks to Vi’s high debt. Vi has a debt of almost Rs 1.8 trillion, IIFL report said.

Is Vi eating more than it can chew? Vi’s EMD of INR22b may allow it to bid for over INR150-200b worth of spectrum. This may lead to a 50MHz spectrum bid in the 3300MHz band, with an annual payout of INR10b. With an EBITDA (pre Ind AS 116) of a mere INR80b, its Capex is much lower than rivals. This can further impact its ability to invest in its network, Motilal Oswal Financial Services said.

5G auction is expected to add limited incremental revenue: Unlike a 3G/4G technology upgrade, which pushed consumer mobility towards data usage, 5G may not materially move the needle in the near term, given: a) wireless data subscribers have crossed over 70 percent of total subscribers, b) 5G may not offer materially higher ARPU, and c) players will take a reasonable time to ramp-up their network.

The latest Ericsson Mobility Report said 5G will represent around 39 percent of mobile subscriptions in India at the end of 2027, with about 500 million subscriptions.

Total mobile data traffic in India is estimated to grow by a factor of 4 between 2021 and 2027 and 56 percent of total mobile data traffic in India will be carried by 5G networks in 2027.