During Q3 FY21, sector revenue run-rate has recovered to the previous peak of US $25 bn, which weakens the case for floor tariffs in our view. While Bharti Airtel and Reliance Jio gained 120-445 bps market share, Vodafone Idea lost 620bps share, with 60% of its share loss coming from its top-3 markets. With market share shifts far from over, operator focus will likely be on market share gains suggesting delays in tariff hikes. Maintain Hold rating on Bharti Airtel. Bharti Airtel share price today is Rs 582, up Rs 9 or 1.6%.

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Steady market share shifts continue:

Market share shifts continued with Reliance Jio gaining 445 bps share and Bharti Airtel gaining 120 bps share over 9M FY21. Vodafone Idea lost 620 bps market share, taking its market share to 21%, nearly half of what it was in FY17. Vodafone Idea saw sharp market share decline in metros and A-Circles, the key urban markets, with Reliance Jio the key beneficiary.

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Vodafone Idea's key markets drive market share losses:

Vodafone Idea's revenue market share losses are no longer just being driven by its weaker markets. During 9MFY21, nearly 60% of Vodafone Idea's 620bps market share loss came from its top-3 markets that form 35% of its revenues. Vodafone Idea lost 12ppt market share in Maharashtra, 9ppt market share in Kerala and 10ppt market share in Gujarat. Despite these markets growing at 12-26% YoY, Vodafone Idea has witnessed a decline of 3-10% YoY in net revenues here. While Bharti Airtel has reported highest growth in Gujarat and Kerala, Reliance Jio has reported the highest growth in Maharashtra.

Focus on market share gains to delay tariff hikes:

Vodafone Idea's continued market share loss in its key markets over 9M FY21 indicates that market share shifts are far from over. Given this, operator focus will likely be on gaining market share, suggesting delays in tariff hikes. Our expectation of sector revenues growing to US $29 bn by FY23 builds in 10% tariff hikes in 4Q FY22 and 4Q FY23 and Jefferies expects market share gains for the top-2 operators to continue. However, post the MSCI rebalancing, Jefferies see limited positive triggers for Bharti Airtel and maintain Hold rating with price target of Rs 675.