Jio has divergent impact on telcos: Fitch

While Bharti’s India mobile EBITDA rises 7%, Vodafone-Idea’s drops 22%

Reliance Jio’s increasing market share is having a divergent impact on the EBIDTA of Indian telecom companies, according to Fitch Ratings.

For the first quarter of the financial year ended March 2020, Bharti Airtel’s reporting EBITDA was in line with Fitch’s expectation while Vodafone-Idea reported weaker results due to loss of market share to Reliance Jio.

“We forecast Indian mobile EBITDA growth for Bharti in FY20, driven by improvements in average revenue per user (ARPU), easing competition and cost savings,” wrote Fitch in its report.

Bharti’s India mobile EBITDA, after operating lease payments, improved by 7% Q-o-Q in 1QFY20, while Vodafone-Idea’s EBITDA declined by 22%, both measures excluding one-off items.

All this while Reliance Jio continued to gain market share, keeping its ARPU flat. All telcos’ 1QFY20 reported financial performance was affected by the introduction of Indian accounting standard 116 (IndAS 116), which removed the distinction between operating and finance leases, and classifies all leases as finance leases. This inflated reported EBITDA and finance leases, said Fitch.

Telcos are likely to monetise their tower and fibre assets to deleverage and create financial flexibility. Bharti’s balance sheet had strengthened as it raised $5.7 billion through a rights issue, stake sale in Airtel Africa and a subsequent IPO of Airtel Africa.

“We expect Bharti to raise about $2.5 billion-$3.5 billion through a stake sale in a soon-to-be-merged Bharti Infratel and Indus Tower entity in India, while Vodafone-Idea is likely to sell its entire 11% stake in the tower merged entity for about ₹5,600 crore.

Vodafone-Idea is also planning to monetise 1,58,000 kilometres of fibre assets. Reliance Jio announced that it entered into an agreement to monetise its tower and fibre assets worth ₹25,200 crore via an infrastructure investment trust.

A letter from the Editor

Dear reader,

We have been keeping you up-to-date with information on the developments in India and the world that have a bearing on our health and wellbeing, our lives and livelihoods, during these difficult times. To enable wide dissemination of news that is in public interest, we have increased the number of articles that can be read free, and extended free trial periods. However, we have a request for those who can afford to subscribe: please do. As we fight disinformation and misinformation, and keep apace with the happenings, we need to commit greater resources to news gathering operations. We promise to deliver quality journalism that stays away from vested interest and political propaganda.

Support Quality Journalism
Recommended for you
This article is closed for comments.
Please Email the Editor

Printable version | Jun 1, 2020 8:45:59 AM |

Next Story