Bharti Airtel has discontinued several of its cheaper prepaid data packs earlier this week, including a Rs 299 plan that offered 1GB a day. The move is essentially seen as a step to nudge subscribers towards pricier options. Is this the beginning of a broader trend? Axis Securities believes so.
As per a recent report by Axis Securities, this pattern will likely continue through the rest of the financial year, as operators lean on premium plans, data-hungry customers and new business lines to lift revenue, even as the pace of network spending starts to ease.
Airtel, Jio turn to ARPU and premiumisation
For years, Indian telecom growth was largely a subscriber story, with operators chasing volumes in a price-sensitive market. As per the report, this is changing, and the next phase of growth for telecom players will be driven by average revenue per user, or ARPU, expansion and premiumisation of the existing 4G and 5G base, rather than fresh subscriber additions.
Bharti Airtel’s numbers reflect this shift already. Per the report, the company’s ARPU rose to Rs 264 in the June quarter, up 5.6% from a year earlier, while Reliance Jio’s ARPU came in at Rs 216. Airtel also recorded its highest-ever quarterly postpaid additions in the same period, the report noted.
Rising data consumption, rational pricing by operators and subscriber growth in rural and smaller towns are expected to keep supporting this trend, the report noted. The brokerage added that the enterprise segment is also expected to add to this momentum as companies deploy 5G, cloud partnerships and artificial intelligence tools on their networks.
5G spending eases as telecom capex cycle turns
After years of heavy spending on 5G rollout, operators are entering a phase where that investment starts to pay off. The report noted that as 5G rollout moves toward monetisation, capex intensity should gradually moderate, which in turn should support stronger free cash flow and improve balance sheets across the sector.
Bharti Airtel’s management has already indicated that while spending on radio infrastructure is moderating, investment in fibre, transport networks and non-wireless infrastructure will stay elevated. The company’s capital expenditure is increasingly being redirected toward fibre transport, homes and data centres.
Airtel, Jio look beyond mobile connectivity
Both Airtel and Jio are also building revenue streams outside traditional mobile connectivity, according to the report. Airtel has been expanding into payments, lending, cloud services, cybersecurity and data centres, with its data centre arm Nxtra adding 11 customers in the June quarter as it works toward a long-term capacity target of 1 gigawatt. Jio, meanwhile, is scaling up its home broadband, enterprise, cloud and AI offerings.
Vodafone Idea an exception to the broad trend?
Axis Direct’s analysts see this diversification as a way for the two large operators to increase their share of customer spending beyond the monthly recharge. Vodafone Idea, the third major player, remains the exception, the report said. Its financial position continues to lag behind its peers, and its recovery is being watched closely by the brokerage as a factor that could affect competitive intensity and pricing discipline across the industry.
Conclusion
Rising data consumption, rational pricing by operators and subscriber growth in rural and smaller towns are expected to keep supporting this trend, the report noted. The brokerage added that the enterprise segment is also expected to add to this momentum as companies deploy 5G, cloud partnerships and artificial intelligence tools on their networks.
Axis Securities, however, highlighted that any delay in tariff hikes, regulatory headwinds, or a decline in operating margins could weigh on the pace of improvement.