Supreme Court’s AGR verdict is good for RJio: Report

Rajesh Kurup Mumbai | Updated on February 17, 2020 Published on February 17, 2020

In the previous quarter, Jio topped in terms of standalone AGR   -  The Hindu

The Supreme Court quashing the modification petition filed by the telecom operators is positive for Reliance Jio Infocomm (RJio), as it may help the company to accelerate its market share aspirations by more than 50 per cent.

In addition, the ability to raise tariffs may help the 4G market leader, according to report by SBICap Securities.

While similar arguments can be made for Bharti Airtel, there is a difference. Bharti and Vodafone Idea have shared infrastructure which is not only about cost structure, separate valuations accruing from tower companies, or the possible increase in capex post a potential Voda Idea shut down, but it will also be about the regulatory hedge which Bharti enjoyed with Vodafone Idea’s presence, it said.

Post Jio’s entry, incumbent telcos were adversely impacted by intense price competition, which led to consistent cash burn, declining profitability and deteriorating balance sheet. Over and above, the AGR judgment has raised serious concerns on Vodafone Idea’s survival, it added.

Curative petition

According to a report by BofA Securities, telecom companies still have an option of a curative petition.

“Given that the government is keen to have a three-player telco market, our base-case view still remains that government will find a solution to this issue. As of now, we remain unsure on how this relief would be given,” it said.

VIL is not in a position to be able to make this $3 billion payment upfront, while the recent QIP by Bharti makes it better placed to do so. If therefore it finally comes to the telcos making an upfront payment, VIL may look to shut up shop, and in that event there is a possibility of government intervention to resolve the situation, BofA Securities added.

According to ICICISecurities, the development is likely to turn the Indian telecom market into a duopoly of two private players with BSNL-MTNL being a distant third.

“While we continue to remain a believer of the thesis that the government should provide some relief, whether on moral grounds or need of the hour for Digital India, the recent turn of events has cast a cloud on Vodafone Idea’s continuance of going concern,” it added.

Published on February 17, 2020

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