Bharti Airtel Sure of Hitting Rs 200 ARPU in Coming Months At the Cost of Rival Telco

Bharti Airtel is the stronger of the two telcos which are currently facing a financial crunch from the latest AGR dues

By December 9th, 2019 AT 12:27 PM
Highlights
  • Bharti Airtel's ARPU currently rests on the Rs 128 level
  • In coming months, the ARPU could go up to Rs 200
  • Airtel could have up to 35% RMS

The Sunil Bharti Mittal led telecom operator, Bharti Airtel is confident that it can grab a revenue market share (RMS) of as much as 35% up from the current levels of 32% according to the analysts. This growth will come on the cost of Vodafone Idea if the telecom operators do not receive any help from the government on the matter of Adjusted Gross Revenue (AGR). It is worth noting that brokerage firm Goldman Sachs, hosted Sunil Bharti Mittal, the chairman of the Bharti Airtel on the occasion of its CIO tour in which the executive revealed that he expects the Average Revenue Per User (ARPU), a very crucial parameter in the industry to reach Rs 200 for Bharti Airtel in the next few months, ET reported. Given some more time, the ARPU might climb as high as Rs 300 as well. To recall, the last time Bharti Airtel saw its ARPU soar above Rs 200 was back when Reliance Jio had not made its entry into the market. As opposed to that, this year, in the quarter ending September, the telecom operator had clocked an ARPU of Rs 128.

bharti-airtel-sure-arpu-rs200

Bharti Airtel Under Immense Pressure From AGR Dues

Goldman Sachs in a recent report said, “Return on capital in Indian telecom remains low, and as per the company, ARPUs need to go up for it to improve. Bharti believes this is true even for competition.” The brokerage firm also added that Bharti Airtel believes that it can get to 35% RMS from its current level of 32% as well. However, the bigger concern right now for the telecom operators is the AGR dues which has become a burden on these companies after the Supreme Court changed the definition of AGR to include non-core items as well. This has put Bharti Airtel in dues worth Rs 35,500 crore. Now, Bharti Airtel is looking forward to receiving some relief from the government on these dues like waivers, moratoriums, or even a deferment for extending the payment deadline.

In a worse situation than Bharti Airtel is Vodafone Idea which has dues worth Rs 53,000 crore. The analysts have also noted that the telecom operators need to pay their dues before the end of January. The two telecom operators have also filed separate review petitions in the Supreme Court. If the SC dismisses these petitions and there is no relief from the government’s side, then the telcos might find it tough to pay their dues by the end of January next year. As per Morgan Stanley, this could further strengthen Airtel’s market share in the industry with a little more consolidation happening in the coming days.

Airtel Could Grab 50% of Incremental Market Share

Going by the words of Goldman Sachs, Bharti Airtel is confident of grabbing the 50% of the incremental market share in case of reallocation in the industry. Also, the brokerage has noted that this incremental market share would come at a very high EBITDA margin. Also, there is a very slim possibility of a new telecom player entering the industry.

On the other hand, the competing telecom operator Vodafone Idea has already remarked that if no relief comes its way, then it might have to shut shop. The telecom operator chairman, Kumar Mangalam Birla, remarked on the same on the sidelines of an industry event. Also, to better their financials, the telecom operators have raised tariffs by up to 40%, but despite this new tariff hike, the position of Vodafone Idea is worse off as compared to the competition.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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Kiran Fernandes | GoaNikhilKRISHNENDU MAJISukeshkunal Recent comment authors
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Sukesh
Sukesh

Foolish VodaIdea following Airtel like a slave, without applying its own mind, will result in its cartel friend Airtel gaining more than Jio, in coming period. With 50% price increase + worst network coverage (almost nil in most rural aeas), VodaIdea will easily lose another 100-120 million customers within next one year, and will 100% go into bankruptcy, as most Indian customers will stop finding value in VodaIdea. Smart Airtel will then buy bankrupt VodaIdea. The biggest bad luck/panauti of VodaIdea is that it is run by a Vodafone management guy rather than an Idea management guy. Everyone knows that… Read more »

Kiran Fernandes | Goa
Kiran Fernandes | Goa

Seems like that’s what they’re aiming for. Merge and leave. Lol

Nikhil
Nikhil

It will be step by step process. For sure merger have not been into action for last three months. Once merged(and is on the planning to leave), they will understand how it will be big mistake to leave this good opportunity was to take on good benefits going into future.

Kiran Fernandes | Goa
Kiran Fernandes | Goa

They’ve got a whole lot of spectrum, it’d be a shame if they lost it all by leaving the merged entity.

kunal
kunal

most customers have done long term recharges in advance to save against cost rise.

so not much effect will be seen in existing & coming last quarter for arpu.

even after that arpu will peak up to 170-180 range max .

Above that , Airtel will need to raise post paid rates & existing plan rates will have to be revised upwards.

revenues will grow further above 40% , but that will be correlated with customer additions.

So arpu will not touch 200.

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