The telecom sector is likely to witness a substantial tariff hike ranging between 15 and 17 per cent following the wrapping up of the upcoming general elections, as per an analyst report. This projection is underscored by the term "imminent," as stated in the report. Notably, Airtel is positioned to get the most significant advantages from this tariff adjustment.


The general election is scheduled to take place in seven phases, starting on April 19 and concluding on June 1. The eagerly awaited results are scheduled to be announced on June 4. "We expect the industry to take a 15-17 per cent tariff hike post the elections," states a report from Antique Stock Broking. The tariff increase was described as imminent, with Airtel being identified as the primary beneficiary in the report. The most recent increase, approximately 20 per cent, occurred in December 2021, as stated.


Providing a breakdown of ARPU (Average Revenue Per User) for India's second-largest telecommunications company, the brokerage note indicated that Bharti's leading current ARPU of Rs 208 is projected to rise to Rs 286 by the end of FY27. This increase will be fueled by various factors, including a Rs 55 contribution from a tariff hike, Rs 10 from the migration of 2G customers to 4G, and a Rs 14 gain from customer upgrades to higher data plans (both 4G and 5G) and transitions to postpaid services.


"We expect Bharti's subscriber base to grow at about two per cent per annum, against the industry growth of one per cent per annum," it said.


The brokerage anticipates that Airtel, under the leadership of Sunil Mittal, will enter its most prosperous financial phase in more than ten years. A tariff increase will fuel this upswing, the transition of 2G customers to advanced technologies, substantial growth in enterprise and Fiber-to-the-Home sectors, and a reduction in capital expenditure following the rollout of 5G, all expected to occur within the next three years.


"While challenges do exist as Bharti has chosen a different 5G rollout path versus key competitors, we believe it is unlikely to dent Bharti's subscriber base or growth significantly. We also believe valuations do not reflect the emerging highly positive macro telecom sector environment," it noted.


Bharti has outlined a capex plan of approximately Rs 75,000 crore spanning FY24-26, which includes the expenses associated with the 5G deployment. Following the rollout, the intensity of capex is expected to decrease considerably.


"We estimate a capex of about Rs 75,000 crore over five years starting FY27, a significant drop from about Rs 19,000-20,000 crore per annum current run-rate for the wireless business, while the total India capex including wireless, DTH, FTTH/ FWA, and Enterprise is likely to decline from the current Rs 26,500 crore per annum run rate (FY24-26) to Rs 23,000 crore per annum (ex-spectrum/ AGR payment)," it said.


The decrease is described as "significant," with a percentage of revenue dropping to 12 per cent from the present 21 per cent, considering the projected long-term revenue growth of 10 per cent CAGR (compounded annual growth rate), primarily attributed to the assumed ARPU growth. Over nearly 5.5 years, the leading two telecom companies in India have been increasing their market share of subscribers at the expense of Vodafone Idea and the state-owned BSNL. The former has faced financial difficulties, while the latter has encountered challenges with its execution.


"While Vodafone Idea is down from 37.2 per cent in September 2018 to almost half at 19.3 per cent in December 2023, Bharti's market share is up from 29.4 per cent to 33 per cent during this period. Jio is the biggest gainer, rising from 21.6 per cent to 39.7 per cent," it said.


Changes in revenue market share follow a similar trend directionally; they have a lesser swing due to differences in price adjustments and the mix between 2G and 4G services.


"VIL was down from 35.3 per cent in 4QFY18 to 19.3 per cent in 4QFY23, while Jio was up from 24.4 per cent to 44.5 per cent, and Bharti was up from 28.7 per cent to 35.8 per cent," reads the Antique Stock Broking report.


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