Bharti Airtel, the second largest wireless operator in India is soon expected to hike tariffs, Motilal Oswal said in a report on Wednesday. The firm said that the tariff hike “which looked uncertain” in the past six to nine month period “has now started to look imminent” due to the “weakening of industry subscriber growth.” However, Motilal Oswal highlighted that the earnings outlook of Airtel “remains strong” due to the “steady 4G subscriber additions.” The steady increase in 4G subscribers is said to result in 2% to 3% quarter-on-quarter (QoQ) average revenue per user (ARPU) growth for Airtel.
Motilal Oswal Expects 15% to 20% Increase in Tariffs
The Telecom Subscription Data for the period ended September 30, 2020, as released by the Telecom Regulatory Authority of India (Trai) highlights that Airtel gained over 3.7 million users in September. The second largest wireless operator in India gained 10 million users in the last three months after registering a cumulative loss of 12.4 million users during the lockdown. Airtel is now said to have 316 million active users as on September 30, 2020, while Reliance Jio is ahead with 318 million active users.
Motilal Oswal said that the recent hikes in Vodafone Idea postpaid plans “creates a positive environment” for the sector.
“Our recent interactions with industry experts indicate a potential price hike of 15-20% in the next two months,” Motilal Oswal said in its report.
The firm said that Vodafone Idea “could take the lead” in further hiking its tariffs due to multiple factors such as “reducing subscriber growth, weak liquidity position and requirement for fund raising.”
“Bharti [Airtel] has indicated it may follow tariff hikes by its peers,” Motilal Oswal said in its report. “RJio’s may follow its peers by maintaining its discount intact.”
Crucially, the firm highlighted that Reliance Jio “may restrain” from making a first move on tariff hikes. Motilal Oswal said the largest wireless operator in India witnessed a large number of users who no longer used its services post the last tariff hikes in December, 2019.
Motilal Oswal Says Xstream Fiber Services Gaining Traction
Meanwhile, the firm highlighted that the partnership between Airtel and local cable operators (LCO) is “gaining traction” and that Airtel should witness an increase in Xstream Fiber user base in the upcoming quarters. Airtel in its second quarter report for the period ended September 30, 2020, highlighted that the LCO model was live across 48 cities in India.
Motilal Oswal said that Airtel initially “restricted its target to reaching the top 100 cities” with its Xstream Fiber services due to the “high investment and low business viability.”
“However, the low investment requirement in the LCO model allows it to expand to additional cities,” Motilal Oswal said in its report. “It has thus increased its target market to 150 cities. RJio has a mammoth target to reach 1,600 cities. However, its current subscriber base of a mere ~1m explains that its focus is limited to top cities.”
