It looks like telecom is gradually moving towards a duopoly
On 04 December when Indian telecom companies announced their September subscription numbers, it was once again a reiteration of an emerging trend. VI, formerly Vodafone Idea, has been losing subscribers to Bharti and Reliance Jio on a consistent basis and Sep-20 was no different. Now the telecom market in India runs the real risk of becoming a duopoly with just two significant players left. What are the highlights of the Sep-20 numbers and what does it bode for the future of telecom in India?
Bharti Airtel comes out trumps
The telecom subscription numbers for the month of Sep-20 were weighed in favor of Bharti and, to a lesser extent, Jio. Clearly, Vodafone was the big loser. Just look at the numbers! Bharti Airtel added 38 lakh subscribers during Sep-20 while Jio added another 15 lakh. In the same month, VI managed to lose a whopping 46 lakh subscribers, hinting at subscriber boredom. Retail subscribers are increasingly gravitating towards the two leaders in the telecom segment.
Overall, Jio boasts of 40.4 crore wireless subscribers while Airtel follows with 32.7 crore subscribers. VI has been clearly on the way down with just 29.6 crore left. It is a well known fact that VI is already squeezed between falling users and low ARPUs. With a huge statutory liability in its books, there appears to be very little respite for Vodafone. It needs infusion of capital and a viable business model.
Challenges in telecom
While Bharti has been adding subscriber base, most are just the customers it lost during the pandemic. In the midst of COVID, Airtel lost 1.25 crore users and has now recovered 1 crore users. For Bharti it is just an attempt to move to status quo. But there are two challenges for Bharti. Firstly, it needs to increase its ARPU from these levels but that is going to be easier said than done in a highly competitive market. Secondly, Airtel has to plan a massive capital outlay if it is keen on leveraging the 5G technology shift in the next few years. It is still not clear where the money will come from as it is also grappling with large dues to the DOT in the form of AGR charges and spectrum fees payable. But the bigger challenge will be for Vodafone Idea.
How to prevent a duopoly?
When Jio was launched, the hope was that it would instill competition and bring down telecom prices. The offering has expanded but prices are yet to come down. Now comes the Catch-22. Vodafone will need a sharp tariff hike to improve its ARPUs and have any chance of seeing through the next few quarters. While Airtel would be pleased with it, they will not go ahead unless Jio is also willing to play ball. ARPUs have gone up in the recent past but to be viable, VI will require a series of price hikes. Else, it would be an inexorable move towards a duopoly; surely not a good idea!