According to a recent report by Goldman Sachs, Bharti Airtel believes that the company’s average revenue per user (ARPU) is expected to reach Rs 200 level in the next few months. Further, Airtel feels that it would have reached that level of ARPU if Covid-19 had not happened.
The report added that as per Airtel, the ideal ARPU for the industry is Rs 300, but it would take long to get there. ARPUs at Rs 300 does not mean there will not be offerings for consumers at Rs 100 price points, and the company believes high-end customers should be able to pay $6-8 per month, it added.
Further, Airtel mentioned that it will not raise tariffs at the cost of market share. For Airtel, the current industry structure is ideal, however, it expects market share to consolidate further. In this regard, the telco believes the top two operators can end up with around 80 per cent market share (currently around 75 per cent) in 12-18 months. Airtel does not expect a material market share difference between the top two players. According to Airtel, its focus is on higher quality customers, and it has consistently been able to attract and retain mid-to-high end users.
On 5G, Goldman Sachs said that Bharti Airtel believes if spectrum prices were to remain at current levels the telco may not participate in auctions in 2021. However, by 2022, Airtel may need to buy 5G spectrum. Airtel expects 5G launch in India’s main cities in coming 2-3 years. According to Airtel, there are currently not enough use cases for 5G and devices will need to be more widely available at lower price points for 5G to happen. The report added that, Airtel does not think 5G will lead to incremental capex as it would just be substituted by a reduction in 4G capex.
In Goldman Sachs’s view, while a tariff hike is inevitable in the near term, given Vodafone Idea’s stretched balance sheet, Airtel is expected to continue winning the market share in the interim; the company’s current 32 per cent market share can potentially rise to mid-to-high 30 per cent in the foreseeable future if tariffs do not move up rapidly.
Picture credits : Bloomberg
