Fund Raising Might Not Help Vodafone-Idea Slow Market Share Loss

Despite Vodafone-Idea coming up with a new strategy to increase its customer base, Fitch ratings believe that it might not help the operator. Besides, the firm expects that the Supreme Court ruling on the AGR dues will not settle the loss of Vodafone-Idea.

"We believe Vodafone Idea will gradually lose market share given its weak balance sheet and limited financial flexibility," the credit analysis firm said. It added, "Jio, which was unaffected by the court's ruling, is likely to strengthen its market leadership with further subscriber gains."

Reliance Jio And Airtel Might Increase Market Share

The firm said that both Jio and Airtel are likely to increase their revenue market share from 70 percent to 75 percent in one year as Vodafone-Idea is expected to lose 70 million users. Notably, the company has already lost 155 million users after the merger.

The rating agency also believes that funds worth Rs. 25,000 crore is unlikely to help the operator to compete against two telecom giants (Jio and Airtel) as the amount is not good enough to meet the targets and clear dues. The operator has asked to pay Rs. 50,400 crore in ten years (March 2031), which includes spectrum usage charges and other penalties. Furthermore, the rating agency claims that the operator earning has not increased and it has been between $200 to $230 million.

"Vodafone Idea's auditor expressed material uncertainty over the company's ability to continue as a going concern, which, the auditor said, depends on successful negotiations with Vodafone Idea's lenders to waive their rights to repayment after breaches of covenants under its bank loans," Fitch Ratings further said.

Vodafone-Idea To Increase Tariffs Soon

The merged entity has recently announced a new logo for the company. The telco has not shared anything on the tariff front yet, but it is expected to raise the tariffs of prepaid plans as it wants to increase its ARPU, which is 30 percent less than Airtel. In that case, it seems quite difficult for the operator to retain its customers as they are not happy with its services due to network issues and lack of offers.