Emerging Markets: The Week Ahead (Mar 4 - 8), India: What's The Big Idea?

By Steven Levine, Senior Market Analyst, Interactive Brokers


Certain of India’s dominant telecom operators have generally seen a downturn in their stock, amid massive consolidation in the industry and a fierce struggle for growth.

To date, shares of Vodafone Idea (NSE: IDEA) and Bharti Airtel (NSE: BHARTIARTL), for example, have plunged roughly 64% and 28%, respectively, from their latest 52-week highs – set around this same time in 2018.

The activity falls against a landscape of an ever-increasing migration of customers to higher-speed telecom networks and lower cost plans, as well as a reduction in the number of India’s operators.

(Click on image to enlarge)

One Big Idea

One response to India’s heated fight for market share came in May 2018, when British telco Vodafone (Nasdaq: VOD) announced a mega tie-up between its local Indian unit and Idea – creating India’s largest telecoms operator in terms of subscribers.

The deal, which closed at the end of August 2018, primarily aimed to accelerate the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies, as well as support the introduction of digital content and The Internet of Things (IoT) services, among other motives.

At the end of 2018, the company boasted 387.2m customers, and as it targets an expansion of its broadband coverage and capacity, it eyes further growth in voice-only plan upgrades to data services, digital co, tent and payment services.

In Q3 FY’19, Vodafone Idea touted a further increase in its broadband subscriber base to 107.9m from 99.7 in the prior quarter and 95.3 in Q1 FY’19. Total data subscribers also surged to 146.3m in the latest quarter from 140.1m in Q2 FY’19. 

The Reserve Bank of India has also observed customers’ general desire for higher speed communications.

The RBI noted in its monetary policy report earlier in February that in the communication sub-segment of India’s services sector, the telephone subscriber base contracted in October-November 2018, while that of broadband continued to expand in October.

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Disclosure: The author does not hold any positions in the financial instruments referenced in the materials provided.

The analysis in this material is provided for information only and is not ...

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