“The government will find it too expensive to provide a large enough fix needed to prop up VIL for anything other than the medium-term,” Deutsche Bank said in a note seen by ET.
The German investment bank said, “The Aditya Birla Group (one of VIL’s co-promoters) may even consider getting Vodafone Idea to go into bankruptcy on the chance that it may be able to repurchase the rump of the business.”
It added that this was an “ambiguous area” with the government wanting to avoid promoters buying assets of their failed companies for fear of regulatory arbitrage, even though when it comes to self-declared bankruptcies, the rules are not entirely clear.
Vodafone Idea faces over Rs 53,000 crore in AGR-related statutory dues, and its chairman Kumar Mangalam Birla has said the company will shut down without government or judicial relief.
According to Deutsche Bank, Vodafone Idea needs more large price hikes, considerable government relief and its market share holding fairly firm to survive. “But we believe it will get two out of these three (requirements) at best, which won’t be enough.”
Under the circumstances, analysts see telecom market leader Jio pushing for market share gains and aggressive customer additions in a sector rapidly evolving into a private duopoly over the next 9-12 months.
CLSA estimates Jio’s operating income doubling in two years to Rs 52,400 crore by when its mobile user base is also slated to swell to 500 million, propelled by a mix of tariff hikes and accelerated market share gains.
“Jio’s Ebitda to double by FY22 to Rs 52,400 crore ($7.4 billion) and pegs the enterprise value of its mobile business at $66 billion,” the brokerage said.
Jio added 14.8 million customers in the fiscal third quarter, and its user base stood at 370 million at the end of December.
Analysts expect Jio’s 35% tariff hike last month to start driving revenue growth for the telco by the fiscal fourth quarter, and its average revenue per user (APRU) — a key performance metric — is estimated to jump over 31% to ?168 by FY22 from Rs 128 reported in the October-December period, FY20.
CLSA estimates 60% of Jio’s revenue growth to be led by the tariff hikes and the balance 40% by market share gains.
Morgan Stanley said Jio, with its low 4G network utilisation and large spectrum footprint, can also potentially on board a large base of subscribers if the telecom industry consolidates into a two-player market.
Deutsche Bank said Jio should also be able to increase its spectrum share afford-ably in the upcoming 5G auction, especially with at least one of its competitors (read: VIL) in financial peril”.
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