Post-polls, telecom may take a 15-17% tariff hike
The telecom industry is expected to take a 15-17% tariff hike post general elections, according to an analyst report that termed the tariff increase in the sector as “imminent” with Airtel as the biggest beneficiary.
The general election in the world’s largest democracy is scheduled to be held in seven phases between April 19 and June 1, and results will be declared on June 4.
“We expect the industry to take a 15-17% tariff hike post the elections,” a report by Antique Stock Broking said, as it described the tariff hike as imminent and Bharti as the biggest beneficiary.
The last hike of about 20% was in December 2021, it said.
Offering a break-up of ARPU (Average Revenue Per User) for India’s second largest telco, the brokerage note said Bharti’s industry-leading current ARPU of ₹208 is set to go up to ₹286 by end of FY27.
This will be driven by a tariff hike contributing ₹55, upgradation of 2G customers to 4G contributing ₹10, and customer upgradation to a higher data plan (both 4G and 5G) and moving to postpaid delivering ₹14 gain. “We expect Bharti’s subscriber base to grow at about two% per annum, against the industry growth of one% per annum,” it said.
The brokerage expects Sunil Mittal-led Airtel to ride its best financial performance phase in over a decade driven by tariff hike, 2G upgradation, strong growth of enterprise and Fibreto-the-Home, and a fall in capex post the 5G rollout, over the next three years.
“While challenges do exist as Bharti has chosen a different 5G rollout path versus key competitors, we believe it is unlikely to dent Bharti’s subscriber base or growth significantly. We also believe valuations do not reflect the emerging highly positive macro telecom sector environment,” it noted.
Bharti has guided for a capex of about ₹75,000 crore over FY24-26, including the 5G rollout, it said, adding that post the rollout, the capex intensity is likely to fall significantly.
“We estimate a capex of about ₹75,000 crore over five years starting FY27, a significant drop from about ₹19,000-“20,000 crore per annum current runrate for the wireless business, while the total India capex including wireless, DTH, FTTH/ FWA, and Enterprise is likely to decline from the current ₹26,500 crore per annum run rate (FY24-26) to ₹23,000 crore per annum (ex-spectrum/ AGR payment),” it said.
The decline is “stark” as a percentage of revenue (down to 12% from the current 21%), given the long-term revenue growth of 10% CAGR (compounded annual growth rate) primarily driven by ARPU growth that has been assumed.
The top two telecom players in India have been gaining subscriber market share over the last almost 5.5 years, at the expense of Vodafone Idea and state-owned BSNL --” the former due to its financial woes and the latter its execution troubles.
“While Vodafone Idea is down from 37.2% in September 2018 to almost half at 19.3% in December 2023, Bharti’s market share is up from 29.4% to 33% during this period. Jio is the biggest gainer rising from 21.6% to 39.7%,” it said.