Data | Vodafone out of ideas: With Airtel and Jio going strong, duopoly concerns emerge in telecom sector

With a falling subscriber rate over the last four calendar years, Vodafone-Idea is in dire straits

The fate of India’s third-largest telecom, Vodafone-Idea, is hanging in the balance. In January 2022, the cash-strapped telecom had agreed to convert its adjusted gross revenues (AGR)-related dues worth ₹ 16,000 crore into government equity. With this move, the government would have become the largest shareholder with a 33% stake, reducing the promoter holding to 50%. However, despite the Cabinet’s go-ahead, the conversion is yet to conclude. The delay has caused a severe fund crunch for Vodafone-Idea. While the government wants the promoters to infuse capital before taking a stake, the promoters — Vodafone Group plc and Aditya Birla Group — are not keen to pump in more money.

The financial woes of Indian telecoms are due to two reasons. One, intense competition led to tariff wars and shrunk the market from 15 players in 2010 to just four at present. If Vodafone-Idea collapses, the sector will effectively become a duopoly. Two, AGR dues have further strained the pockets of older players such as Bharti Airtel and Vodafone-Idea. AGR refers to the dues related to licenses and spectrum charges paid by the operators to the Centre based on the revenues they earn.

Vodafone was the second-largest player for most part of the last decade. With the merger, Vodafone-Idea occupied the top spot in 2018 with a wireless subscriber market share of 35.6%. But since then, it has been losing its share and is now a distant third. Jio has emerged as a market leader with 37%. Chart 1 shows the market share (in %) of service providers in the wireless subscriber segment.

Charts appear incomplete? Click to remove AMP mode

In the last four calendar years, Vodafone-Idea has lost over 173 million subscribers. From a high of 418.7 million in 2018, its subscriber base as of October 2022 was down to 245.6 million. While Airtel too lost subscribers in 2019, it has been gaining since 2020 and has acquired more subscribers than Jio on a yearly basis. Chart 2 shows the net subscribers gained or lost by a telecom operator annually.

Click to subscribe to our Data newsletter

Apart from losing subscribers, Vodafone-Idea’s average revenue per user (ARPU) per month has also failed to keep pace with that of its rivals. Jio’s entry in 2016 disrupted the markets with cheap data and low tariffs, thus bringing down the ARPUs. But the rise in tariffs since FY20 has increased the ARPUs. Here too, Airtel has remained ahead of Jio. In FY23, Airtel’s ARPU was Rs. 187 compared to Jio’s ₹177 while Vodafone-Idea lagged behind with ₹130. Chart 3 shows the average revenue earned per user per month (in ₹) by private service providers in wireless services.