The Indian telecom sector has seen immense fortunes being made and lost and now, after years of consolidation, the country has three major telecom operators left in the form of Bharti Airtel, Reliance Jio and Vodafone Idea. While Vi, as it is now known as is just a pale shadow of its old self, Airtel and Jio have been grabbing the eye-balls with their performances and even higher expectations from investors. Now, it is being reported that Bharti Airtel ARPU (Average Revenue per User) is expected to see some growth going forward.
According to analysts, a 38% surge in Bharti Airtel ARPU is seen and that this will actually be over a period of three years. Airtel ARPU is expected to reach ₹286 mark even as it stands at ₹208 in the October-December quarter, according to a report by the Financial Express. Importantly, they say several strategic initiatives will power this growth for Airtel.
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Factors Driving ARPU Growth
1. Price Hikes: Sensing that subscribers in India are willing to pay more for better services, Airtel is set to lead the charge in terms of hiking prices. Analysts project a hike as high as 15-17%! In case you are wondering when this will happen, then know that it will likely be after the general elections. Antique Stock Broking says a tariff hike will add ₹55 to Airtel ARPU.
2. 2G to 4G Migration: This upgrade will play a critical role. It is expected to boost ARPU by as much as an estimated ₹10.
{{/usCountry}}2. 2G to 4G Migration: This upgrade will play a critical role. It is expected to boost ARPU by as much as an estimated ₹10.
{{/usCountry}}3. Higher Data Plans: Airtel is looking to cajole its customers to upgrade to higher data plans and at the same time incentivise prepaid subscribers to move to postpaid plans. Postpaid subscribers make up 6.5% of Airtel’s total base. This plan is expected to boost Airtel's ARPU by ₹14. Also, what is noteworthy is that Airtel still caters to 90 million 2G subscribers and that makes for 27% of its total subscriber base.
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Airtel vs Jio - Strategic Market Positioning
Will it be a price war between these telecom giants? Well, Airtel looks to be focusing on upgrading subscribers and tariff hikes. Jio, on the other hand may well look to promote higher data consumption. Airtel is behind Jio in terms of market share.
Subscriber Growth and Market Share
Antique Stock Broking is looking at a 2% annual growth in Airtel’s subscriber base. Notably, Airtel has added over 13 million mobile subscribers between April and February, boosting its ̣market share to 33%, Telecom Regulatory Authority of India (TRAI) data reveals.
Financial Metrics
And what of the Return on Capital Employed (ROCE)? Airtel ROCE has jumped to 7.6% in FY23. To put the surge in perspective, it was 2.6% in FY21. Analysts say this is likely due to mobile tariff hikes.
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Future Investments
Bharti Airtel capex has been put at ₹75,000 crore over FY24–26, and 5G rollout is a big chunk of that. Airtel capex is estimated to drop to around ₹75,000 crore over five years from FY27 onwards.