With the three major telecom operators in India – Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) – taking a tariff hike of up to 25 per cent in July 2024 with a possibility of another hike this year by 10 per cent, JM Financial said, telcos’ ARPU is expected to grow at 11-12 per cent CAGR in the next 3-4 years. Given the consolidated industry structure and Jio’s need for higher ARPU to justify its significant 5G capex and also given its potential listing plans, the segment is expected to achieve an ARPU of Rs 280-310 in the next 3-4 years (via tariff hikes, MBB upgrades, post-paid additions and data monetisation) for a pre-tax RoCE of 12-15 per cent, the brokerage firm said.
Further, both Bharti Airtel and Jio’s management have reiterated that capex hit a peak in FY24 and is likely to moderate from FY25 with pan-India rollout of 5G already done. Thus, JM Financial said, Bharti Airtel’s India business FCF is expected to rise to around Rs 281 billion/ Rs 361 billion in FY25/FY26 and Jio’s FCF is projected to rise to approximately Rs 234 billion/ Rs 369 billion in FY25/FY26; Bharti/BHL/Jio are likely to get to net cash position by FY29-30.
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Another healthy quarter for telcos
Telecom companies witnessed another healthy quarter, registering 4-6 per cent ARPU growth on-quarter during Q3. This was led by residual flow-through of the Jul’24 tariff hike.
“Bharti continued to lead with ARPU of Rs 245 (up 5.2 per cent QoQ) followed by BHL with Rs 241 (up 5.7 per cent QoQ); Jio had an ARPU of Rs 203 (up 4.2 per cent QoQ) or ~Rs 192 ex-FTTH, while VIL had ARPU (excluding M2M subs) of Rs 173 (up 4.2 per cent QoQ),” stated the JM Financial report. It further maintained that the full impact of the July 2024 tariff hike for Jio is likely to be visible by the next couple of quarters given more of its subscribers are on long-duration plans (compared to other telcos) while it should have largely been visible by Q3FY25 itself for other telcos.
Bharti,
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