Recent tariff hikes will drive higher ARPU for telecom operators, says Centrum Broking

In the Indian wireless market, Bharti Airtel leads with an industry-high ARPU of 211 for the quarter, up from 209 in Q4FY24. Meanwhile, Jio reported a flat ARPU of 182 per month, remaining unchanged sequentially.

A Ksheerasagar
Published20 Aug 2024, 05:05 PM IST
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Recent tariff hikes will drive higher ARPU for telecom operators, says Centrum Broking
Recent tariff hikes will drive higher ARPU for telecom operators, says Centrum Broking (Pixabay)

The recent tariff hike announced by the telecom operators would help to drive higher ARPU, and its effect would be seen in Q3 FY25, said domestic brokerage firm Centrum Broking in its latest report.

The brokerage observes that the average revenue per user (ARPU), a key performance metric for telecoms in the sector, is steadily increasing due to the migration from 2G to 4G and a growing proportion of postpaid customers. In the Indian wireless market, Bharti Airtel leads with an industry-high ARPU of 211 for the quarter, up from 209 in Q4FY24. Meanwhile, Jio reported a flat ARPU of 182 per month, remaining unchanged sequentially.

VIL reported an ARPU of 146, which was flat sequentially. The brokerage expects the SIM consolidation to be limited this time. However, there are signs of 2G users porting to BSNL, which has not raised its tariff plans.

Also Read | Then vs Now: What was India’s telecom landscape like 15 years ago?

5G expansion accelerates

It noted that both Airtel and Reliance Jio are expanding their 5G coverage to more cities, now reaching most districts across India. Reliance Jio has seen approximately 130 million subscribers transition to 5G, compared to 90 million for Bharti Airtel.

The report highlights that the implementation of 5G has significantly increased the data capacity of telecom operators, contributing to a substantial portion of total wireless data traffic.

Telecom operators have taken initial steps towards the monetization of the 5G rollout, as unlimited 5G is now available on only higher value recharges. There has been a return of some sort of stability to the telecom industry, led by telecom reforms in Sep 21 and tariff hikes in Dec 2019, Nov 21, and July 24, and that has led to a steady rise in industry ARPU.

Also Read | Tariff hikes to boost Jio, Airtel, Vodafone Idea’s ARPUs, profitability

After the completion of FPO, the Union government now holds around 24% of the equity stake in VIL. Vodafone Idea is in discussion with banks to raise debt capital of 250 billion, as it has announced capex plans of 500–550 billion over the next 3 years to improve its network capacity.

It has announced the launch of its 5G services in the next six months. The net debt at 2.0 trillion, at a net debt/EBITDA of 12x on FY24 EBITDA, remains high.

Indus Towers continues to see strong tower and colocation addition led by demand from the 5G rollout and one of the telecom operators investing significantly in expanding its rural coverage. It is expected that its receivables issue will see early resolution with the successful fundraising by VIL.

Also Read | Reliance Jio IPO: RIL could list telecom arm by 2025 at $112 bn valuation

Meanwhile, the brokerage has an 'Add' rating on Bharti Airtel with a target price of 1577 apiece, while it has a 'Sell' rating on Vodafone Idea with a price target of 11 apiece and a 'Reduce' rating on Tata Communications with a price target of 1846 apiece.

DisclaimerThe views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

 

 

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First Published:20 Aug 2024, 05:05 PM IST
Business NewsMarketsStock MarketsRecent tariff hikes will drive higher ARPU for telecom operators, says Centrum Broking

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