Analysts, Telecom News, ET Telecom

By Animesh Deb

New Delhi: An upward revision of prepaid tariffs by national telecom majors is expected to provide much needed respite for the entire industry as the rollout of 5G services in the country approaches.

Last week, Vodafone Idea, Bharti Airtel and Reliance Jio increased their prepaid rates by around 20% each. The revised tariffs for Vodafone Idea and Airtel went into effect last Thursday and Friday, respectively.

India’s telecom companies are now heavily focused on improving Average Revenue Per User (ARPU), while maintaining their active subscriber base.

“The tariff hike, led by Bharti Airtel, should improve ARPU and free cash flow for telecommunications operators. Additional cash flow would help network expansion and roll out 5G if needed, ”said Mohit Nigam, Head-PMS, Hem Securities.

Bharti Airtel and Reliance Jio are expected to earn over 7,500 crore each as cash flow due to their relatively high market share, Nigam said.

However, Vodafone Idea is expected to show relatively better margin expansion than its peers due to the price hike, but subscriber retention will be the key factor to watch as the price hike could further reduce the company’s market share. telecommunications company, ”Nigam said. noted.

According to Ankit Pareek, Research Analyst at Broking’s Choice: “Given positive triggers like the recently announced ‘Telecoms Relief and Tariff Rise Package’, Reliance Industries and Bharti Airtel are our top picks in the telecom space, which should be the main beneficiaries in the medium and long term. “

The tariff revision is a positive measure to strengthen the activity and improve the cash flow of telecommunications players, added Pareek.

Earlier this year, the Center cleared 100% of foreign direct investment (FDI) in the telecommunications sector automatically, approved a four-year moratorium on contributions from telecommunications service providers, and changed the definition of gross income. Adjusted (AGR), among other measures to support the cash-strapped sector.

The long-awaited tariff increases should signal a recovery in the sector and would complement the aid plan offered by the Indian government in September 2021. The three telecom operators announced increases of around 20% of their existing tariffs, the first significant increase after December 2019, ”Ankit Jain, Assistant Vice President and Area Head – Corporate Ratings, told ICRA.

“This would translate into an improvement in the operating parameters of the industry, with the industry’s ARPU expected to improve to around Rs 150-160 in the medium term, which would translate into revenue growth of 12 to 14% in FY 23 (for the three telecom operators combined) and given the high operating leverage, the segment’s operating profit is expected to increase 15-18% to around Rs 125,000 crore in fiscal year 23, ”Jain added.

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