According to Fitch Ratings, India’s 5G spectrum sale could be delayed if the government prioritises 4G auctions in 2021. The global ratings agency is also expecting limited participation from Bharti Airtel and Vodafone Idea (Vi) as 5G spectrum pricing remains exorbitant and there is a lack of relevant use cases.
Further, Fitch also expects Reliance Jio and Bharti Airtel to gain revenue share at the expense of Vi. It expects Airtel and Jio to jointly dominate 75 per cent- 80 per cent of the telecom market, from around 70 per cent at present. As per its estimates, Vi could lose 50 million – 70 million subscribers in the next 12 months, after losing about 155 million subscribers in the last nine quarters, of which, Fitch expects that Jio could pick-up over half of Vi’s subscriber losses, with the balance going to Airtel.
Meanwhile, Fitch estimates that Vi’s net leverage is likely to deteriorate substantially as a result of the Supreme Court’s (SC) verdict, which requires the telco to pay its adjusted gross revenue (AGR) dues of $8.9 billion. However, it expects Airtel and Jio’s revenues to rise by around 10 per cent -15 per cent, following strong growth expectations in 2020 of over 30 percent. Further, it said that earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins for Airtel and Jio may widen by 100-200 basis points (bps) to 37 per cent and 44 per cent, respectively, on higher wireless tariffs and fixed-broadband expansion. The ratings agency also estimates Airtel’s net leverage to be around 2.2x-2.4x, below the downgrade trigger of 2.5x, supported by sustained higher wireless tariffs amid easing price competition.