Airtel plans gradual rollout of 5G, tariff hike in FY23: Vittal
Vittal said that the carrier was fully ready for rolling out 5G but its strategy would depend upon the final reserve prices that will be decided by the government
PremiumBharti Airtel’s pace of 5G rollouts will be moderate in the coming year as it expects the penetration of 5G devices in the country to remain tepid, with 14-16% of total smartphone base being on 5G by FY24 from just about 4% in FY22, even as the carrier said it was ready for deployment.
“I would expect a more moderated rollout of 5G in the coming year and perhaps a more accelerated rollout in in in subsequent years. If you take a three to four year view, yes, 5G will go in most parts of urban India but if you take the immediate view of 22-23, I would imagine that this this must be this will be a moderate rollout," Airtel chief executive Gopal Vittal said in an analyst call on its fourth quarter earnings on Wednesday.
Vittal, who was reappointed in the role for another five years on Wednesday, said that the carrier was fully ready for rolling out 5G but its strategy would depend upon the final reserve prices that will be decided by the government.
“We are fully ready for 5G, our core network, our radio network, and even our transport network is fully future proofed," he said.
“We will not comment on our strategy and approach since it is dependent on the final user price finalized by the company," he added.
Vittal said that the base levels recommended by the Telecom Regulatory Authority of India (Trai) were disappointing. The telecom industry has been asking for a 90-95% reduction in the 2018 reserve price of ₹49,200 crore for pan-India 5G airwaves, however, Trai has recommended a near 36% reduction from these levels.
“The industry had hoped for a massive reduction in prices. While there has been a reduction, it has not been adequate and is in that sense disappointing," he said.
The Airtel chief executive further noted that the semiconductor shortage and rising chipset prices had led to rise in entry level smartphone prices, and hence softening of upgradation to 4G from 2G, amid headwinds of rising commodity and energy prices. However, this was likely to pass as consumers were likely to settle for escalated prices.
“I believe this is a temporary phenomenon and the reason is that people tend to get used to a new normal, and I think the initial shock is likely to wear off in the next few months. That said there are obviously headwinds in terms of inflation on commodity prices and energy prices that obviously take a toll on consumers, wallets. Let’s see how this plays out," he said.
The carrier will also undertake another round of tariff increase to get to the ARPU level of ₹200 per user per month, despite inflation concerns, as it feels that the present tariff levels were extremely low.
“We should start seeing some tariff increases during the course of this year. Tariffs at the level they are, are still very, very low and I think we’ve been consistent in in saying that the first port of call is to be to get to 200 rupees, which would require at least one round of tariff increase," he said.
Vittal said that tariff increase would be easily absorbed by majoroty of the customer base since the carrier had not seen SIM consolidation – as an effect of tariff increase – in the 550 million smartphone customer base, as much as it did in the featurephone segment where ARPUs were about ₹100 per month.
Vittal said in response to a question on tariff outlook that the carrier was looking to reach the ₹300 ARPU mark over the next five years. India’s second-largest telecom operator’s average revenue per user—a key measure of profitability—was ₹178 for the quarter, the highest among its rivals. It was 22.7% more than ₹145 in the same quarter last financial year, and 9.2% more than ₹163 in the December quarter.
Airtel Ltd posted a net profit of ₹2,008 crore for the quarter ended March, a massive 164% growth over the same quarter last year, as the full flow of tariff increase took effect and its 4G customers crossed the 200-million mark. Profit jumped 142% from ₹829 crore in the December quarter.
The Sunil Mittal-promoted carrier recorded a 22.3% growth on-year in consolidated revenue to ₹31,500 crore for the quarter, while revenue from its India business rose 22.7% to ₹22,500 crore. Vittal said that that the carrier had raised $18 billion of funding to strengthen our balance sheet over the last few years, improving its leverage from 2.95 to 2.51. For FY23, the operating free cash flow will be ‘more than adequate to cover’ all of its capex needs and with improved tariffs, the operating leverage will release more cash.
Airtel Group’s chief financial officer Harjeet Kohli said that the carrier is expected to see benefit of ₹1600-1700 crore to its P&L statement on an annualised basis as an impact of cash flows from the business, pre-payment of ₹24,000 crore of government debt, bank guarantees being returned by the government and cheaper rate refinance over the past months.
Airtel’s free cash flow was at over ₹10,000 crore on a consolidated basis for the March quarter, rising from ₹8,803 crore in December. For the full year, free cash flow stood at ₹32,448 crore, up from ₹21,970 crore.
Vittal further added that Airtel had agreed on a broad framework for renewing its tower contract, and that it will be inked by the end of the quarter.
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