Bharti Airtel Likely to Achieve Rs 300 ARPU Target by 2028

Reported by Tanay Singh Thakur October 5th, 2023 at 07:03 am

Currently, Bharti Airtel is investing a lot of money in rolling out 5G. The capex would normalise around FY25, post which Airtel is likely going to see its free cash flow (FCF) grow, said JM Financial. Aided by the growth in ARPU, Airtel's consolidated FCF is expected to rise to Rs 466 billion in FY25.

Highlights

Bharti Airtel, India's second-largest telecom operator is expected to achieve its ARPU (average revenue per user) target of Rs 300 by 2028.
The telco's premiumisation strategy will drive its ARPU up at 9% CAGR.
It is worth noting that Airtel already has the leading ARPU amongst the telecom players in India.

Bharti Airtel, India's second-largest telecom operator is expected to achieve its ARPU (average revenue per user) target of Rs 300 by 2028. The telco's premiumisation strategy will drive its ARPU up at 9% CAGR, said JM Financial in a recent report. It is worth noting that Airtel already has the leading ARPU amongst the telecom players in India. For Q1 FY24, Airtel reported its ARPU to be Rs 200. For the coming quarters, while the ARPU growth will be slow due to no tariff hike in the short-term, the telco will keep gaining market share out of Vodafone Idea's expense.

JM Financial listed a set of reasons for how Airtel would see its ARPU reaching the Rs 300 figure in the next five years (by 2028).

How Airtel's ARPU Will Reach Rs 300?

The first reason would be that many users would upgrade from a feature phone to a smartphone, resulting in needing prepaid plans of higher value with a little bit more data. Airtel has many 2G users right now which are potential 4G/5G customers for the future. Then, Airtel will see users shifting from prepaid services to postpaid via family plans and aggressive 5G rollout, JM Financial said.

Data monetisation would also help Airtel in boosting the ARPU as more consumers would require extra data or go for higher data limit plans because of growing use cases of mobile data. Airtel also has a huge opportunity to earn more money through international plans by simplifying the offers for the consumers to understand.

Further, the telco already increased its entry-level prepaid plan from Rs 99 to Rs 155. In the next five years, this figure is only going to go upwards, resulting in the growth of ARPU.

Airtel to See Growth in FCF from 2025

Currently, Bharti Airtel is investing a lot of money in rolling out 5G. The capex would normalise around FY25, post which Airtel is likely going to see its free cash flow (FCF) grow, said JM Financial. Aided by the growth in ARPU, Airtel's consolidated FCF is expected to rise to Rs 466 billion in FY25. Hereon, Airtel will be able to accelerate the reduction of net debt and JM Financial expects the telco to achieve net cash position by FY29.