Jio Bharat feature phone to hurt Airtel more vs Vodafone Idea: Jeferries

Reliance Jio’s 4G feature phone is expected to drive a higher market share loss among 2G users of Bharti Airtel as compared to Vodafone Idea, further delaying tariff hikes, analysts said.

They added that attractive pricing and reasonable device quality will drive market share gains for Jio.

“While Bharti’s network is better than its other 2G peers, its dominant share in the feature-phone market will lead to higher subscriber losses. We expect Bharti to witness voice subscriber churn of 17 million by March 2026,” Jefferies said in a report.

As per estimates, Airtel has over 130 million active 2G subscribers and around 100 million paying voice subscribers, implying a 40-50% share among the 250 million feature-phone market. Earlier this month, Jio had launched the Rs 999 internet enabled feature phone – Jio Bharat, with the aim to capture a majority of the 2G user base in the country. With attractive pricing, those feature phone users who are at the end of their device life, are likely to save 26% on their mobile spends.

“This leads to an annual addressable market of 60-65 million users for Jio Bharat and we expect Reliance Jio to gain 55 million subscribers by March 2026,” the report said. Analysts further said that hefty network capacity additions along with Jio Bharat launch underscore the Mukesh Ambani-led company’s rising focus on subscriber gains and it did not bode well for tariff hikes. “Hence, we change our tariff hike assumptions of a 15% hike towards end CY23 to 20% hike in 2Q FY25, which leads to a 3-5% cut to our FY24-25 India mobile Arpu (average revenue per user) estimates,” the report added.

Meanwhile, analysts believe that survival worries ease for Vodafone Idea (Vi) in the medium term as the promoters have shown willingness to infuse additional equity to the tune of Rs 2,000 crore. Over the last few years, Vodafone Idea has been struggling financially, cutting down on investments in networks and delaying payments to vendors. But the company has ensured prompt payments on its bank debt, which has declined to Rs 11,400 crore from Rs 35,300 crore in the past few years.

“Given the sharp decline in external dues, we expect Vi to at least get some relief on its debt payments (if not new credit lines), which would likely ensure its survival at least until 1H FY26 (i.e., until the end of the moratorium), in our view,” Kotak Institutional Equities said in a report.

As per Kotak, Vi still faces a cash shortfall of Rs 5000 crore over FY 2024 until 2H FY26 and has Rs 13500 crore dues to vendors. In Vi’s 4Q FY23 earnings call, the management highlighted that its current promoters are ready to put some additional equity investment, in addition to the Rs 5000 crore infused earlier in FY 2022.

The struggling telco has been in talks with lenders or potential equity investors to raise Rs 25000-30000 crore, which would help the company to repay its vendor dues and increase network spending by Rs 4000-6000 crore annually over the next two years to plug some gaps versus peers on 4G coverage and rollout of 5G in select cities, analysts said.