According to a research note by CareEdge Ratings, the latest round of tariff hikes undertaken by Reliance Jio, Bharti Airtel, and Vodafone Idea Limited (Vi) could boost their blended average revenue per user (ARPU) by 15 per cent to Rs 220 in the fiscal year 2024-25 (FY25), compared to Rs 191 in FY24.
The research note stated that this can potentially expand the telcos’ profit before interest, lease, depreciation and tax (PBILDT) by 20-22 per cent in FY25.
As per the research note, every Rs 1 increase in the ARPU could add nearly Rs 10 billion to the industry’s PBILDT. Meanwhile, factoring in the growth in the blended ARPU, the expected expansion of PBILDT will aid the telcos to deleverage the capital, technology upgrades, and network expansion.
The research note mentioned that the top telecom incumbents have recently said that they would implement a 20 per cent headline rate increase in their prepaid and postpaid plans. Airtel and Jio’s revised tariffs will come into force from July 3, 2024, while those of Vi will be effective July 4, 2024.
It highlighted that Jio and Airtel need to improve returns after splurging heavily on 5G spectrum, whereas, Vi bolstered by its Rs 230 billion equity fundraising efforts, has been striving to become more competitive, arrest subscriber churn, and repair its financials to pay vendors and other dues. Airtel and Vi have also reiterated in the past that an increase in ARPU is crucial at an industry level for a sustainable telecom sector.
Further, it stated that Jio and Airtel currently offer free commercial 5G services on mobile to increase customer stickiness and have launched 5G fixed wireless access (FWA) in key metros to monetise their latest generation networks. Vi aims significant investments over the next quarters to enhance 4G services and launch 5G. However, Jio and Airtel aim to offer unlimited 5G on 2 GB per day and above plans post-tariff hikes. Furthermore, Airtel has the industry-leading ARPU of Rs 209 against Jio’s Rs 181.7 and Vi’s Rs 146.
