Cellular is turning out to be the biggest loser in the ultra-competitive telecom industry post the entry of Reliance Jio.

The Aditya Birla Group’s telecom arm was the biggest gainer of subscribers as well as revenue market share after the cancellation of licences in 2012. Now, RJio is reversing those gains.

Idea’s revenue market share (RMS) increased from just 9 per cent in FY11 to 19 per cent in FY16 and remained at that level in FY17 too. But with RJio upping the competitive pressure through its low data tariffs and free voice calls, Idea’s RMS is down to 16.2 per cent in the second quarter of this fiscal, according to TRAI revenue reports. That makes it a loss of almost three per cent RMS in just two quarters despite Idea managing to hold on to its subscriber market share of 17 per cent.

In contrast, Airtel has managed to retain its FY16 RMS of 31.4 per cent, which was down marginally only to 31.2 per cent in the first half of this fiscal. RJio has garnered a market share of 14.5 per cent since its launch in September 2016.

In response to an email query, an Idea spokesperson said: “There has been erosion of revenue for the sector overall, with the entry of the new operator, and market share has got redistributed between operators.” The industry revenue loss was nearly ₹3,000 crore in FY17 compared to FY16, Idea added.

“Idea is feeling the heat because of the quality of its subscriber base. They are primarily not the top of the pyramid high ARPU providers. Its customers are mid-to-low ARPU generators mostly from lower segments of urban cities and tier-1, tier-2 towns. And this is where RJio’s low-cost offering has been the most impactful,” says Jayanth Kolla, founder and partner at technology research firm Convergence Catalyst.

Falling data tariff

While RJio has cut the per GB tariff on its flagship plan by 42 per cent, Idea has refrained from major rate cuts. “We will be competitive, but we will not be a discount warrior,” Idea MD Himanshu Kapania said in a concall after third quarter results.

This stance, analysts believe, could hurt the company going forward. “While industry consolidation is over, pricing sanity remains to be seen as RJio continues to slash tariffs. We are worried by Idea’s intent of not being aggressive on pricing and focussing on non-data 2G users, as it could be a double edged sword resulting in sharp subscriber churn,” Bhupendra Tiwary, equity research analyst at ICICI Securities, said in a report.

Himanshu Shah, research analyst with HDFC Securities, agrees that the company’s decision to refrain from competing aggressively in the tariff battle between RJio and Bharti Airtel “may impact Idea’s subscriber share and revenue.”

Idea’s ARPU fell to ₹114 in the third quarter from ₹132 in the second quarter while Airtel had an ARPU of ₹123 and RJio ₹154.

Idea also had a cumulative loss of over ₹3,000 crore in the first nine months of this fiscal in sharp contrast with the loss of ₹78 crore in the corresponding nine months last fiscal.

Other constraints

Kolla points out that Idea continues to face other constraints such as lower capex spends and an inefficient spectrum mix. Idea has increased its capex for the fiscal from ₹6,000 crore to ₹7,000 crore – the amount RJio spent in the last quarter alone. “They hold one of the least efficient spectrum mixes of all the top four players. The GSM spectrum is mostly in the 1800 MHz band and 4G spectrum is also not in the top revenue generating markets,” Kolla adds.

What can give a boost to Idea’s fortunes now is the pending merger with Vodafone, expected to be completed in the first half of the next fiscal. “The company is busy merging with Vodafone and may want to put a lot of initiatives on hold until the merger is over instead of overlapping expenditure and efforts,” adds Kolla.

The proposed merger with Vodafone will create India’s largest mobile operator by subscribers and revenue market share. The silver lining for Idea is the sooner-than-expected merger and efforts at active infrastructure sharing.

“In the medium term, Idea could deliver superior returns, as its merger consummates, and EBITDA rebounds in a three-player market,” says Shah. Till that happens, Idea may have to put up with few more quarters of loss in revenue market share.