Vodafone Idea or Vi stares at a bleak future, including the possibility of "shutting shop" due to factors triggered by heightened competition, as per a report by brokerage Kotak Institutional Equities. It also expects telecom companies to start hiking tariffs only after the general elections in June 2024 amid inflation staying above the RBI's upper tolerance level.
In the absence of the price hikes, Vi will not be able to keep up with the investments required and launch 5G services, which will lead to an erosion of subscribers and make the planned capital raising exercise difficult, the report by Kotak Institutional Equities said. The long-feared prospect of a "duopoly", with only Reliance Jio and Bharti Airtel remaining in the fray, is likely to play out, the report said.
The brokerage said it now expects telcos to start tariff hikes only after the conclusion of the general elections in June 2024 and added that factors contributing to the prospect include headline inflation staying above the RBI's comfort band and state elections.
At present, the deep-pocketed Jio's renewed aggression is being matched by Airtel, as both the telcos seek to garner premium subscribers, it said, adding Jio's new family postpaid plans effectively caps monthly outgo at Rs 205-235 per month for customers, and would likely delay the prospects of a tariff hike and 5G monetisation.
The brokerage report said Airtel is already at a premium to Jio on the headline prices in most packs, and taking a unilateral tariff hike as it did on minimum recharge packs recently seems "difficult" going forward.
The delayed tariff hikes will impact both profitability and revenues for the telcos, it said. The Vodafone Idea scrip closed 3.67 per cent down at Rs 6.04 apiece on the BSE on Monday, as against gains of 0.22 per cent on the benchmark.