As per India Ratings and Research (Ind-Ra), the telecom industry is headed towards a higher average revenue per user (ARPU) regime and strong subscriber growth amid clear turnaround signals over the past four to five quarters that is likely to drive revenue growth for the top private carriers, particularly Bharti Airtel and Reliance Jio.
The rating company said that the sector turnaround is being driven by a mix of moderation in competition intensity between the big telcos resulting in waning tariff differentials, increasing data penetration, supporting growth in ARPU and a growing subscriber base.
Ind-Ra stated that a combination of these factors is resulting in an overall improvement in operational and financial parameters of telecom companies.
The company sees continued revenue growth for Reliance Jio and Bharti Airtel due to moderation in competition intensity, and also expects financially-weaker Vodafone Idea Limited (Vi) to continue witnessing growing ARPU. However, it believes that the latter’s subscriber base will need close monitoring as it continues to lose customers, stung by its inability to compete effectively with Airtel and Jio in the 4G space due to much lower network capex spends.
Further, Ind-Ra added that a conducive regulatory environment and a possible pick-up in data usage and enterprise business activities after the Covid-19 crisis is slated to benefit telcos at large. The increasing share of data and broadband subscribers along with the increase in data tariffs augurs well for ARPU growth, it said. Additionally, Ind-Ra added that Jio’s recent focus on post-paid tariff plans coupled with Vi’s tariff hikes on select plans in the past six months also indicates the telcos’ inclination towards growing ARPUs in the long run.