According to a recent study by Jefferies, mobile revenues and realisation per user in India could double between financial years (FYs) 2020 and 2025. India could see doubling of sector revenues from an estimated $19 billion in 2019-20 to $38 billion in 2024-25.

Further, it added that the telecom sector has entered a phase of tariff discipline that is likely to sustain. This is because competition is at the lowest it has ever been, the market being a virtual duopoly.

A comparison of mobile average revenue per users (ARPU) of over 25 countries shows that India’s mobile revenues-to- gross domestic product (GDP) ratio at 0.7 per cent is among the lowest versus countries with similar per-capita GDP, implying scope for a rise in ARPU.

Jefferies added that on the back of sustaining tariff discipline, ARPU could rise 3-5 per cent annually even beyond 2024-25, in line with trends across fast-moving consumer goods (FMCG) products and two-wheelers over the past decade. Furthermore, the robust 24 million gross subscriber additions reported by both Bharti Airtel and Reliance Jio in fourth quarter (Q4) FY20 after the tariff hikes in December 2019 also indicates that the market is willing to accept tariff hikes.

The company believes that the countries with low competition have higher mobile revenue/GDP ratios. The report added that Reliance Jio is now the market leader with 35 per cent revenue market share and continues to gain subscribers at an encouraging pace. Vodafone Idea is unlikely to be a potential price disruptor, given that it already faces cashflow pressures driven by $16 billion debt and $7 billion adjusted gross revenue (AGR) liabilities.

Jefferies believes that Bharti Airtel is the key beneficiary of the rising tariffs and ongoing consolidation in the Indian telecom space.