Reliance Jio and Bharti Airtel, two leading telecom operators in India, are set to improve return on capital employed (RoCE) in the coming years. The telcos have completed their 5G rollout and will now moderate capex levels which will help with improving overall returns. At the same time, the telcos are expected to implement tariff hikes, which will further boost their overall revenues.
Macquarie Research said that Airtel's RoCE is expected to jump from 8% in FY24 to 10-19% during FY25-28, aided by a better subscriber mix, lower capex, and tariff hikes (via ET).
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Bharti Airtel has continuously seen an uptick in the average revenue per user (ARPU) over the last few years. It is the only telco in the Indian market with an ARPU of beyond Rs 200.
But it won't be just Airtel that will see better returns, it will also be Reliance Jio. Now this is an important aspect for Jio as Reliance Industries looks to list the company in the market. In FY24, Jio saw a return of 6%, but in the coming years, even though the capex momentum is expected to be sustained, the telco's returns are likely to reach 11-12%.
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RoCE for the telcos will rise sharply only in FY26, said Priyanka Bansal, associate director, Ind-Ra. According to Bansal, as the telcos lower capex and implement tariff hikes, their returns are going to be pronounced compared to current levels. Apart from the mobile services revenue, telcos are also looking to grow their non-mobility business. Jio has especially put in plenty of effort to sell IoT (internet of things) products and more in the Indian market as the network infrastructure it has created is ready to be monetised in more than just one way.
