2023 will be decisive for Vodafone Idea, fundraising critical: CLSA

The brokerage firm CLSA said that with a decline in VI's share, Airtel and Jio together control 77 per cent and should continue to gain share in 2023

2023 will be a decisive year for Vodafone Idea (Vi), brokerage firm CLSA said on Tuesday. It added that data adoption and tariff hike-led revenue growth as well as 5G rollouts will be the key monitorable for the year.

In its outlook on the telecom sector, released on Tuesday, the firm said that 2023 will have three trends to watch out for when it comes to India's mobile market. Among them will be 5G rollouts and monetisation led by top-end subscribers.

Vi's financial crisis has not been averted, with delays in fundraising and pending conversion of four years' interest on the spectrum and AGR (Adjusted Gross Revenue) payments into equity for the government. The company is in urgent requirement of around Rs 24,000 crore to pay the immediate dues. 

"Vi fundraising is critical for 4G capex and 5G rollout while delays could trigger further share loss, which would be gained for RJio and Bharti which will ramp up 5G rollouts in 2023," it added.

With the decline in VI's share, Bharti Airtel and Jio together control 77 per cent and should continue to gain share, the report said. As per the report, the new telecom bill will be "positive" for Vi.

"Vi, which is currently in a four-year moratorium on government dues, could gain from this regulatory bill, which could have options of write-offs," the report said. 

CLSA added that the telecom sector's Average Revenue Per User (ARPU), when adjusted for inflation, is still 17 per cent below the pre-Reliance Jio launch. Jio's IPO is also an event to watch, it said.

"...we expect Bharti (Airtel) to lead tariff hikes to ARPU of Rs 236 by FY25, while Bharti targets Rs 300 ARPU," the report said.

"We see multiple events to watch, led by likely tariff hikes and Reliance Jio's (RJio) widely-anticipated IPO," it added.

It also said that Bharti (Airtel) will possibly lead tariff hikes, with Vi and Reliance Jio likely to follow.

Private networks, if allowed, may eat into 5G operators' enterprise service opportunities.

India's mobile sector revenue, after rising 14 per cent in 2022, should grow again in 2023 led by tariff hikes, rising data penetration and usage, it said. 

Jio and Bharti's 5G rollout will coincide with growing subscriber realisations and market share gains.

"We forecast rising ARPU and data penetration to drive a 14 per cent CAGR in sector revenue to Rs 2,84,600 crore ($36 billion) by FY25," it said.

(With agency inputs)