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.
