Reliance Jio is likely to be the biggest beneficiary of the up to 40% tariff hike announced by telecom companies on Sunday, as analysts estimate the telco to clock an incremental quarterly revenue of 3,900 crore compared with 2,400 crore and 2,100 crore for Bharti Airtel and Vodafone Idea respectively.
The incremental revenues are compared to reported revenues in the September quarter, assuming no change in the respective subscriber base of the three companies, according to the analysts.
Reliance Jio will have the strongest balance sheet and become virtually net debt-free company by March 31, 2020 with the exception of spectrum-related liabilities while Vodafone Idea and Bharti Airtel are saddled with debt exceeding 1 lakh crore each.
Reliance Jio may continue to increase its market share as it offers to provide 300% higher benefits to its customers compared with competition while Bharti Airtel is likely to retain its market share and may turn profitable at pre-tax level after reporting several quarters of losses.
But for Vodafone Idea, despite the hike in ARPU (average revenue per user), free cash flows are in the negative and market share is falling.
Negative cash flow
According to Motilal Oswal research report, worries linger on Vodafone Idea in spite of tariff hike, given the continued negative free cash flow (FCF) position.
Given the dual SIMsim card phenomenon, we expect market share loss for weaker players Vodafone Idea as this could also trigger SIM card consolidation and subsequently, subscriber churn. Bharti, on the other hand, could see lower operating leverage but healthy FCF generation and improving balance sheet with robust 50% plus potential upside, said the research note.
Besides, AGR liability for Vodafone Idea and Bharti Airtel due to an adverse Supreme Court judgement has given Reliance Jio an advantageous position.
Bharti Airtel has scheduled its board meeting for December 4 to look at potential fund-raising for AGR liability, which needs to be met in three months, subject to the outcome of review petition filed by the telcos.