Vodafone Idea & Bharti Airtel
Today we will talk about two companies in the telecom sector that was in recent news. Their names are Bharti Airtel and VI- Vodafone Idea. Vodafone idea has been facing a lot of problems since recent times. At one point, its share price was Rs.4. Recently, news related to fundraising, AGR dues, and SC decisions came out. Despite all such news, the current share price trades at Rs.10. On the other hand share price of Bharti Airtel has witnessed great returns by touching Rs.550-560. But after the SC decision and a series of other news, its share touched Rs.400. Its current share trades at Rs.465. The overall telecom sector has seen a lot of fluctuation in recent times. Earlier a lot of companies were there in this sector. However, after Jio’s entry and AGR dues news, maximum companies in the telecom sector were shut.
How many telecom companies are doing business?
Presently only three main players are doing business. These three companies are namely, Reliance Jio Bharti Airtel and Vodafone Idea. Currently, these are the three players. And if you think there’s a scope of good performance in the coming days, these are the three options available for an investor in the telecom sector. An interesting fact about Reliance Jio is that it comes under Reliance industries. Hence its share price is not solely impacted by Jio but by other businesses as well. The prospects and revenues of other segments affect its share price. After this, the other two companies in the telecom sector are Bharti Airtel & Vodafone Idea.
A direct comparison of both these companies won’t be justified. Hence we will talk about both the companies by comparing some of the parameters for interesting insights. About 3-4 parameters are primarily important for the telecom industry.
The ARPU of Vodafone Idea & Bharti Airtel
The first and significant parameter is ARPU, which discusses the average revenue from a subscriber. This notifies the revenue generated by any company in the telecom sector from a subscriber. After the pricing war started by Reliance Jio, the ARPU numbers significantly fell. However, interesting numbers have emerged from Telecom sector consolidation and high tariff plans. In India, the price of 1 GB of data is significantly less as compared to developed countries. In the past few months, Airtel’s ARPU has increased. Currently, Airtel has the highest ARPU in the telecom sector. ARPU is an important parameter to know while investing.
The next parameter is the number of subscribers added to the company. TRAI releases data on the month on month subscribers of different companies. A lot of telecom companies are also penetrating the digital sector. Reliance Jio has remarkably done well in digital penetration with Airtel next in the line.
The revenue of the telecom sector
As per TRAI data, the telecom sector’s revenue has improved from the last Q2 of the financial year 2021. Overall revenue of telecom sector has improved. In comparison to Q1, a 5% improvement has been seen in Q2. However, year on year Q2 comparison reveals a 26% jump in numbers. In Q4 2019, a dip in the telecom sector’s overall revenue was seen with the least revenue record. In Q4 2019, pricing war and low tariffs marked Jio’s entry with low earnings in the entire telecom sector. This dip in comparison to the total revenue of the previous quarter has shown a 33% improvement. This is a commendable improvement in the overall revenue of the telecom sector.
The share of VI, Airtel, and Reliance Jio
The share of VI, Airtel, and Reliance Jio out of Rs.100 revenue of the overall sector. Reliance Jio has the highest share in the telecom sector in the sphere of revenue, 38%. Next on the second rank is Airtel’s revenue market share is 32%. So, first is Reliance Jio with 38%, the second is Airtel with 32%. Following the market share of VI is 20.9%. Interestingly the current VI market share is 20.9%, which has fallen by 22% points. Its revenue market share was more than 40% on its peak stage, which stands at 20.9%. The sum-up of the market share of the three companies is 91%.
This means they occupy a significant share in the telecom sector. Airtel has the highest ARPU out of all the companies. Its ARPU is Rs.162. While the ARPU of VI was Rs.119 in the last quarter. The ARPU of VI is quite low as compared to Airtel. In comparison to the old numbers, the ARPU of VI has increased from Rs. 114 to Rs.119. The industry players are planning to increase tariff with a major focus on ARPU. Generally, there is a huge debt in the telecom sector. To control debt and costing in the beta margin, companies are planning to increase tariffs. Hence, ARPU growth will be seen by major companies.
The number of the subscriber of Vodafone Idea & Bharti Airtel
Now let’s converse about the subscriber base. VI and Airtel have 271 million and 298 million subscribers, respectively. The churn percentage of VI has increased significantly. It talks about the subscribers that left VI and joined other telecom companies. As per the recent data of TRAI, Airtel added the highest subscribers in August month. Airtel and Reliance Jio added 28 lakh and 18 lakh subscribers, respectively. Airtel has performed well in previous months with ARPU and growth in subscriber base.
Another parameter important in telecom and, in fact, all other sectors is the EBITDA margin. It is the amount left after deducting core expenses from total earnings. Assume that Rs.100 is sales, while raw material is Rs.50. On deducting them, Rs.50 or 50% is the EBITDA margin. A better number is considered great for a company. A high margin is indicative of high profits as expenses can be deducted well.
The EBITDA margin of Airtel in the last quarter turned out to be great. In Q2, Airtel and VI reported an EBITDA margin of 46% and 33%, respectively. In this aspect, Airtel has performed well. EBITDA or Net profit margin can be improved through cost optimization and reduction. In the releases of VI, its initiatives to reduce cost have been clearly stated. This can further improve the operating or net profit margin. The implementation and impact of the EBITDA margin will be seen in emerging times.
Besides this, common news related to both these companies is the AGR dues amount. SC has mentioned that AGR dues can be paid in installments in the next 10 years. This is considered a relief for them. VI has a high debt level of around Rs.1 lakh crore. The company is trying to improve this situation by stake sale and funding to fulfill capital requirements.