The tariff hike taken by India’s leading telecom players in the range of 10-25 per cent is expected to improve their blended average revenue per user (ARPU) by about 15 per cent to Rs 220 in current fiscal 2025 from around Rs 191 in the fiscal 2024, said CareEdge Ratings. After a two and a half year hiatus, the top three telecom players, that is, Reliance Jio, Bharti Airtel, Vodafone Idea (Vi), earlier last week, announced a substantial increase in tariffs across its prepaid and postpaid plans. While Reliance Jio hiked tariffs by 12-25 per cent on June 27, Bharti Airtel went for a 10-21 per cent increase on Friday, followed by 10-23 per cent hike by Vodafone Idea on the same day. Tariffs were last raised by the operators in November 2021 and before it in December 2019.
According to CareEdge, every Re 1 increase in ARPU is expected to add about Rs 1000 crore to the industry’s profit before interest lease depreciation and tax (PBILDT). “With 15% growth in blended ARPU expected, the expected expansion of PBILDT will aid the telcos to deleverage the capital, technology upgrades and in network expansion. The growth in PBILDT expansion factors in net subscriber addition of 2-3 per cent followed fewer consolidations in SIM and adoption of 4G/5G services,” it said.
The tariff hike, per CareEdge, can potentially expand the telcos PBILDT by 20 per cent to 22 per cent in the current fiscal year. This is a structural positive for an industry whose Return on Capital Employed (ROCE) is weighed down by huge investments in 5G roll-out including spectrum purchases, it added.
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Prasanna Krishnan, Associate Director, CareEdge Ratings, said, “The tariff hikes are expected to increase average revenue per user (ARPU) for the telcos by 15 per cent and thereby PBILDT expand by 20-22 per cent. CareEdge Ratings expects the debt levels to moderate in the current fiscal 2025 and expected to decline going forward with the expected moderation in capex intensity coupled with muted participation in recently concluded June 2024 spectrum auctions. Thereby, the leverage ratio (Debt/PBILDT) of the telcos to improve from 4.35x in fiscal 2024 to 3.8x in fiscal 2025 with the expansion in PBILDT and some moderation in debt level.”
Going forward, key monitorables for the industry will be the extent of downtrading from the existing plans to cheaper ones by the subscriber, migration of subscribers to 4G/5G services, and competitive landscape among the telcos.
From: financialexpress
Financial News
