Airtel and Jio to gain $1 billion each in annual free cash flow following tariff hike, says Goldman

According to Goldman Sachs, Bharti Airtel and Reliance Jio are estimated to gain an extra $1 billion (approximately Rs 75 billion) each in free cash flows (FCF) annually after the latest round of prepaid tariff hikes.

The higher FCF is estimated to result in Airtel’s (wireless) and Jio’s operating income growing at 38 per cent and 32 per cent compounded respectively, annually over FY’ 21-24.

The recent prepaid tariff hikes are estimated to boost the average revenue per user (ARPU) for Airtel and Jio by Rs 25 and Rs 20 respectively by March 2022. Meanwhile, Vodafone Idea’s (Vi’s) ARPU is estimated to rise by Rs 5 to Rs 114 by March 2022.

Analysts expect the latest prepaid tariff hikes to improve Vi’s ability to raise capital and help it close its long pending fundraise and use the proceeds to shore up 4G capex spends to dive 2G-to-4G conversions.