- The telcos will see positive growth in ARPU and EBITDA
- No tariff hike has been made for postpaid subscribers so ARPU growth will be limited
- Data growth will be impacted by the new tariff hike
The last three days in the telecom industry have all been about the data tariff hike. For the first time in a long time, the telecom companies have all taken the step to hike tariff for the subscribers by as much as 40%. Vodafone Idea, Reliance Jio and Bharti Airtel have announced that they would be charging more for their prepaid plans in a few days. While Bharti Airtel and Vodafone Idea will implement the new price hike on December 3, Reliance Jio will be bringing the new All-in-One plans with 40% hike on December 6 for the consumers. With all this happening in the industry, there is bound to be a big change on the business side of things as well for the telecom operators. As per a new ET Telecom report, the companies are sure to improve their financial health helped by the tariff hike and they will also witness a rise in their Average Revenue Per User (ARPU).
Telcos to Witness Sharp Rise in ARPU
The analysts, however, have also said that this tariff hike will effect the data growth as well, which has been rising on the back of the fact that India has the cheapest data rates of all countries in the world. After this tariff hike, almost a billion subscribers in India would be required to pay more than 40% for the same plans. Amidst this, it is also crucial to note that Bharti Airtel, Reliance Jio and Vodafone Idea, all have increased prices for their prepaid subscribers which make up for the 90% of their Toal subscriber base. Reliance Jio, which boasts of having the most subscribers with over 355 million subscribers in its base, will also be affected with the new tariff hike as it brings the new change on December 6.
As per Axis Capital, Reliance Jio, Bharti Airtel and Vodafone Idea will witness a rise in their ARPUs on account of the price hike, and this would be without the risk of losing subscribers, as all the operators have raised the prices together. The effect of the increasing ARPU might get enhanced with the operating leverage.
Another brokerage firm, ICICI Securities, has said that the ARPU of the companies will rise by 21%. ICICI Securities said, “Our working shows Bharti’s blended ARPU increasing by 21% to Rs 156 from Rs 128 and VIL’s too by 21% to Rs 131 from Rs 107.” Credit Suisse maintained a similar composure on the tariff hike remarking that they expect more tariff hike to happen in the coming 12 to 18 months. Over this period, the ARPU is expected to grow by 55% by the end of FY22 as compared to the ARPU in September 2019. Credit Suisse also added that it expects EBITDA growth of 15% and 54% QoQ.
Data Growth and Subscriber Addition to Take a Hit
As per Jefferies, “ARPU increase will be between 11-19% across various scenarios. Even in the best case where all ARPU for all data subs increase by 40%, overall APRU increase will be 18/23% for VodaIdea/Bharti.” It is also worth noting that as per Jefferies, the impact on ARPU will be lower because the data hike has not been introduced for the postpaid subscribers. As per Emkay Global, the ARPUs of Bharti Airtel and Vodafone Idea will increase by 28% and 31% in the current financial year. In the next year, the growth in the ARPU would be 7% and 10% respectively.
There are two fronts on which the new data tariff hike will show its impact, and it is data consumption and subscriber addition. As per the analysts, the data consumption in India is expected to take hit by 20% on account of the data tariff hike.
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.