‘Strong performance by Jio, Airtel to buoy sector growth’

FITCH EXPECTS THE SECTOR’S MOBILE SEGMENT EBITDA TO INCREASE BY AT LEAST 40% IN 20-21

NEW DELHI: The Indian telecom industry’s mobile segment is expected to log Ebitda growth of at least 40% in the current fiscal year, higher than 25% in 2019-20, helped by strong showing so far by Reliance Jio and Bharti Airtel, according to Fitch Ratings.

Ebitda or earnings before interest, taxes, depreciation, and amortization is a measure of a firm’s broad financial performance.

Among other highlights, Fitch expects industry monthly

Arpu (average realisation per user) to grow by 5-10% in 2021-22 as 2G and 3G customers gradually upgrade to pricier 4G plans.

It said another tariff hike “is possible” in 2021 given that struggling Vodafone Idea— whose Arpu is 30% lower than Bharti’s—may raise tariffs to improve cash flows.

Fitch said Bharti and Jio are likely to bid to renew their expiring spectrum in the upcoming auctions in March 2021 and may also bid to acquire spectrum in the sub1GHz band, which can be used for 5G services.

“We have assumed Bharti will set aside $500 million in FY21 and $1 billion in FY22 for upfront spectrum investments. We believe that the company is unlikely to launch 5G services before 2022,” Fitch said.

It is pertinent to mention here that the government has already set the ball rolling for the spectrum auction, in which radiowaves valued at ₹3.92 lakh crore will be put on the block. The auction in seven spectrum bands for mobile services—700, 800, 900, 1800, 2100, 2300 and 2500MHz bands—is scheduled to start from March 1.

Airtel has in fact made it clear that it is keen on a “full footprint” of sub-GHz radiowaves across the country to boost coverage indoors and in rural areas, as it pursues an optimised spectrum strategy that balances renewal and capacity needs.

Fitch Ratings expects Indian telecom industry’s mobile segment Ebitda to increase by at least 40% in 2020-21, compared with 25% in the previous financial year.

This is on account of “strong performances” by Reliance Jio and Bharti Airtel in nine months of the current fiscal year.

“EBITDA growth at Jio and Bharti will be driven by higher tariffs, user migration to 4G and high monthly data usage of 12GB-16GB per user as pandemic-led restrictions encouraged users to work from home and use remote-access technologies,” it said.