According to a recent report by Fitch, the telecom industry’s operating income is expected to increase by 40 per cent by the end of the fiscal year (FY) 2020-21 compared to 25 per cent in FY 2019-20. This as per Fitch is backed by strong performance of Reliance Jio and Bharti Airtel.
Further, the report added that Jio and Airtel will continue to increase market share at the cost of Vodafone Idea (Vi). Jio and Bharti will likely increase their combined revenue market share to 80 per cent (December 2020: around 75 per cent), at the expense of third-placed Vi, which will lose 50 million-70 million subscribers in the next 12 months, said Fitch.
In addition, the earnings before interest tax depreciation and amortisation (EBITDA) of the two rivals will be propelled by higher tariffs, shift of customers to 4G and a data usage of 12GB-16GB per user per month as more subscribers work remotely, due to the pandemic.
Furthermore, Fitch added that Airtel is expected to set aside $500 million in FY21 and $1 billion in FY22 towards upfront spectrum investments. However, the firm does not expect Airtel to launch the next generation services before FY22. Sector capex is likely to remain flat in FY22, barring spectrum payments, as both Bharti and Jio front-loaded investments to expand 4G coverage and capacity and built up fibre networks and in-building coverage. Airtel could generate small positive free cash flow in FY21, as operating cash generation is likely to rise and will be used to fund flat core capex, excluding one-time spectrum payments and adjusted gross revenue dues, added Fitch.
