Airtel, Jio, Vi Users Will Pay Upto 59% Extra Money; Telcos Will Increase Profits By These Methods

ICRA says that the latest increase in tariffs by telecom operators such as Reliance Jio, Bharti Airtel, and Vodafone idea coupled with consistent up-gradation of subscribers from 2G to 4G can potentially increase the industry’s average revenue per user or ARPU to Rs 170 by end-FY2023.

Tariff Hikes Stabilizing Telecom Industry

These tariff hikes will help these telcos increase their profit and fund Capex for launching their 5G network according to the rating agency. 

The Senior Vice President and Group Head, Corporate Ratings, ICRA Limited, said Sabyasachi Majumdar, “The latest round of tariff hikes wherein the telcos increased the prepaid tariffs by around 20% will provide much-needed traction in the ARPU levels. These hikes coupled with consistent up-gradation of subscribers to 4G from 2G and increase in usage of telephony services is expected to result in improvement in industry ARPU (excl. BSNL) to around Rs. 170 by the end of FY2023,”.

Jio’s base 4G prepaid plan is priced at Rs 155 After this tariff hike.

Similarly, Airtel and Vi’s base prepaid plan now comes at Rs 179. 

Need To Improve ARPU

According to Airtel, Sunil Mittal the ARPU needs to be Rs 200 and then reach Rs 300.

Previously,  Vi MD Ravinder Takkar has said that a tariff hike is essential to the sector’s survival.

Coming to numbers, Jio’s ARPU was Rs 143.6, while Airtel and Vi clocked in ARPU of Rs 153 and Rs 109, respectively as of the end of September.

ICRA Expects Revenue Growth

In the future, ICRA expects the industry revenues to grow by 18-20% by FY2023, followed by a growth of 10-12% in FY2024.

Further adding, “… given the high operating leverage, is likely to translate in healthy expansion in operating profits, the same is projected to grow by around 30% in FY2023. These are likely to translate into a ROCE of around 10% for FY2023 for the industry,”. 

Besides this, ICRA expects that the telecoms reforms package will provide a cash flow relief of Rs 40,000 crore for the industry till FY2025.

It said, “For FY2022, the telecom sector is expected to contribute to around Rs. 54,000 crores to GoI’s non-tax receipts which will be close to the budgeted estimate for the fiscal,”.

With the latest developments, ICRA has revised its outlook on the telecom services industry to ‘Stable’ from ‘Negative’.

While calling industry debt “Achilles’ heel”, ICRA estimates the debt levels to remain at around Rs. 4.7 lakh crore as of March 31, 2022, before moderating to Rs. 4.5 lakh crore as of March 31, 2023.

The Assistant Vice President and Sector Head, ICRA Limited, Ankit Jain said, “The debt levels have remained unyielding for quite some time now and with the expectation of improvement in the profit generation after the latest tariff hikes, ICRA expects the debt metrics to improve as reflected by debt/OPBDITA of 3.4 times and interest coverage of 3.5 times as on March 31, 2023,”.