Telecom operators Jio, Bharti Airtel and Vodafone Idea are expected to hike tariffs again this year by 10%, according to analysts. Upon implementation, this would be the second hike in a year’s gap.
Telecom operators had last hiked the mobile tariffs by up to 25% in July 2024 , which came after a gap of over two years.
Analysts said a tariff hike is likely as the operators may continue their focus on monetisation. Further, they may introduce 5G-specific pricing.
“Jio’s potential listing in 2025 will likely make it more amenable to higher tariffs to boost its growth. Bharti Airtel wants to raise tariffs for better ROCE (return on capital employed),” said Akshat Agarwal and Ayush Bansal, analysts at Jefferies, in a note. Moreover, with the government being the largest stakeholder, VIL may also favour tariff hikes,” they added.
Analysts said tariff hike bodes well for the sector, as the same would also lead to an increase in average revenue per user (Arpu) by atleast 25%.
A pick-up in revenue growth along with moderating capital expenditure will support healthy margin expansion and free cashflow generation, thereby marking 2025 as the year of growth for telecom operators.
On the back of tariff hike, Jefferies expects the telecom sector revenue growth to increase to 15% year-on year. Strong growth in revenues will help margins expand by 170/200 basis points for Bharti Airtel and Jio.
“We also see a divergent trend in ROCEs of Bharti and Jio given the latter’s higher capex intensity. Jio’s ROCE is likely to remain depressed unless it raises mobile tariffs,” the brokerage said in the report.
The pace of revenue market share gain is expected to be slow for Jio as its subscriber market share gains are not yielding much gains on revenue market share. Post the tariff hikes, Jio in the July-September quarter lost 11 million subscribers owing to the impact of SIM card consolidation.
Analysts said Airtel’s rural market share gains may slow as bulk of its rollouts have happened.
Vodafone Idea, on the other hand, is expected to witness a better market share gain as it rolls out networks post the recent capital raise.
Reliance Industries, parent company of Jio, is scheduled to declare the earnings for the October-December quarter on January 16.
The company’s subscriber number, Arpu increase and its commentary on the impact of previous tariff hikes will be in focus.
The impact of the recent tariff hikes will continue to boost Arpu of telecom operators in the October-December quarter.
Analysts expect the Arpu of the operators to increase 3-5% sequentially during the quarter.
Basis, an increase in Arpu, the revenue for the three telecom operators is expected to increase by 4.3% q-o-q on average, led by Bharti Airtel.
