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Editor’s note: We neither want to sound gloomy nor do we want to discourage you from participating in the growth of India’s platform economy. However, we thought of sharing a contrast we noticed. On one hand, companies such as Zomato are ready to make a dream debut while on the other, telcos which are ‘so called’ facilitators of a digital revolution are facing unprecedented financial difficulties. Can these paradoxical scenes co-exist for long? This post attempts to find answers to this question. 

The forthcoming IPO of Zomato is generating a lot of excitement on Dalal Street.

A massive Rs. 9,375 crore IPO by a food-tech company is the first-of-its-kind in India. The success or failure of it may decide the fate of potential loss-making unicorns hoping to make a stock market debut.

Although an average Indian investor is relatively new to investing in concept stocks that are presently loss-making companies, their popularity is spreading like an inferno.

The growth of India’s platform economy hinges upon the penetration and availability of high-speed internet. Most analysts seem to have taken these factors for granted while ‘modeling’ the growth prospects of India’s platform economy.

Beyond a doubt, mobile penetration and data consumption in India have increased exponentially over the last few years. This trend got accelerated during the pandemic and India’s digital economy advanced by several years.

Telecom Operators

Customers have every reason to be happy except for frequent call drops and occasional blips in the internet speed.

Platform Economy

Everything’s not well though. 

As you may know, three companies—Jio, Airtel and Vodafone idea (Vi), dominate India’s telecom services market at present. While the country is awaiting a 5G revolution, Vi is struggling to stay afloat. Considering the capital-intensive nature of the industry, financial soundness of telcos is imperative for the success of India’s digital future. Zomato IPO

Is the Indian market heading towards a duopoly?

The financial troubles of Vi are well known, as are its plans to overcome the hurdles. For those who came in late, they include cost optimizations, margin improvements and fund raising.

Vi is aiming to achieve an annual savings of Rs 4,000 crore in operational costs by December 2021.

So far, the company has achieved reasonable success in margin improvements and cost optimization, but has failed miserably in raising fresh capital. 


Vi has been trying to raise Rs 25,000 crore through a combination of equity and debt for the past 8-10 months. Nothing concrete has happened on this front so far.

As a result, Vi is seeking an extension of a year to pay the spectrum instalment of Rs 8,200 due in April 2022.

As per the management commentary, it’s been difficult for Vi to find investors due to price-wars amongst telcos. Vi has been insisting that introducing a ‘floor price’ would resolve worries pertaining to tariff-wars. Investors are perhaps waiting to see improvements at an industry-level before committing money to Vi. The troubled telco has also asserted that its discussions with potential investors are still ‘active’.

Vi’s statements to the media suggest that it doesn’t have any ‘plan B’ if it doesn’t manage to raise capital.

At a time when Vi is raising capital to get out of financial woes, its competitors are creating a war-chest for future growth.

Airtel’s overseas bond issuance programme of USD 1.25 billion received bids of USD 2.5 billion in Q4FY21..According to the company’s press release, this was the largest issuance by any Indian investment grade issuer, since January 2019. Nonetheless, Airtel also needs to be mindful of the debt-piled on its books, though the situation hasn’t turned alarming yet.

And as you may know, Jio Platforms raised Rs 1.52 lakh crore from 13 marquee investors last year.

Jio flexed its muscles at the recently concluded spectrum auction and emerged as the largest bidder.

In March 2021, the government garnered Rs 77,815 crore by auctioning 855.60 MHz of airwaves in a two-day auction—one of the shortest auctions in a decade. However, this represented just 19% of the spectrum on offer in value terms, and 37% in terms of available volume. 

Jio acquired 488.35 MHz of spectrum for Rs 57, 123 crore, of which Rs 19,939 was paid upfront. At the same auction, Airtel acquired 355.45 MHz of spectrum and Vodafone managed to increase its spectrum holdings by just 23.6 MHz.

Jio’s total spectrum holdings jumped 55% to 1,717 MHz, post the March-round of spectrum auction. Vi has a cumulative spectrum holdings of 1768.4 MHz.


It’s a no brainer: any company that controls a huge market share, operates at high profitability margins and keeps aside growth capital is likely to emerge as the winner.

Can India’s 5G mission run in a duopoly environment? 

In a nutshell…

Debt-laden Vi is an elephant in the room. Are we going to see significant tariff hikes by telcos in the next 12-15 months?  Because, unless rational pricing practices return to the market, there’s always a risk of India’s telecom space turning competition-mukt before it becomes 2-G-mukt.


You may also like to read: Dedicated Freight Corridors: a real game changer for the Indian economy?

Disclaimer: The blog is for information purposes only and anything mentioned herein shouldn’t be construed as a fundamental reason to buy/hold/sell any stock. Furthermore, the information provided in the blog and observations made therefrom shouldn’t be treated as an extension of recommendations made on the other properties of Ventura Securities. We strongly suggest you to consult your financial advisor before taking any decision pertaining to your finances.  Asset allocation becomes extremely relevant.

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

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