Tariff hike only way; we won’t shy away: Mittal
Says ARPU should rise 40% by year-end
A day after the board of Bharti Airtel approved a ~21,000-crore rights issue primarily to fund its dues linked to adjusted gross revenue (AGR), Chairman Sunil Bharti Mittal pressed for tariff hike as the only way forward for the telecom industry.
“We have done our bit in a limited way, we have run out of patience and we can't be an outlier all the time,” Mittal said at the company's investor call on Monday, while reiterating that the company would not shy away from raising tariffs.
The company stock reacted positively on Monday, ending 4.44 per cent up at ~620.35 on BSE.
The company had slightly tweaked tariff plans recently without impacting a large chunk of its subscriber base. No telco has initiated any significant rate hike after December 2019.
Indicating a target for a tariff hike, Mittal said the monthly ARPU (average revenue per user) should touch ~200 by the end of the current fiscal, projecting a 40 per cent rise from the current ~146 a month. Eventually, it should go up to ~300 to serve the customers well, he said.
Referring to the recent increase in its minimum prepaid plan from ~49 to ~79, he said it can go further up to ~99.
“But when will we be able to do it, we don't know. We have to depend on market forces and we are observing them carefully,” he added.
On competition, Mittal maintained that the sector should have at least three players even if the third one is weaker than others.
SUNIL MITTAL, BHARTI AIRTEL CHAIRMAN
WE ARE LOADED WITH ENORMOUS DEBT, MOSTLY ON ACCOUNT OF AGR DUES AND LEVERAGE IN OUR COMPANY THAT BOTHERS US, BUT AT THE SAME TIME WE ARE COMFORTABLE THAT WE CAN DO BUSINESS AS USUAL”
FOR EVERY ~100 OF REVENUE, ~35 GO IN VARIOUS FORMS OF LEVIES. WE HOPE… THE GOVERNMENT WILL FAVOURABLY LOOK AT SOME OF THE DEMANDS OF THE INDUSTRY”
Responding to Airtel’s fund raising step, many analysts expressed surprise. Motilal Oswal in its report said, "This capital raise is surprising as the management in its last few calls stated that its leverage and liquidity position is comfortable and self-sustainable, with healthy free cash flow generation in all verticals, thus indicating no additional capital requirement."
Historically, the management has given a very clear capex outlook, with a yearly guidance. In fact, tracing back to the peak capex intensity in FY16, the management announced a three-year capex plan called ‘project leap’, providing detailed clarity about its capex plans, it said.
Mittal said in the analyst call on Monday, ‘’it would be a grave error if we stayed with business as usual.’’ He added, ‘’we are loaded with enormous debt, mostly on account of the AGR dues, and leverage in our company that bothers us… But at the same time we are comfortable that we can do business as usual." The company’s net debt at the end of June quarter was up 7.5 per cent sequentially to ~1.60 trillion. It was up 30.7 per cent year on year.
On the issue of levies that are imposed on telecom companies, he said, "for every Rs 100 of revenue, ~35 goes in various forms of levies. We hope that as we step up and do our part, the government will also favourably look at some of the genuine demands of the industry, enabling a multiplier effect and positive outcome."
On 5G auctions expected next year, Mittal said the company intended to roll out a 5G network in key cities at the earliest to be able to provide the benefits of the new-age networks to its customer, especially heavy users and industrial applications. He however urged the government to improve the 5G spectrum reserve price. "It is looking good, 15 per cent of the market is already 5G enabled," he added.
The company plans to accelerate the rollout of fibre to prepare the network in time for 5G rollout. The focus would be on digital infrastructure, he said, adding India had entered a phase of exponential growth in its digital economy.
.