India Telecoms: A Report

Operators remain confident of taking one more tariff hike in FY23.

BNP Paribas India has released a Telecom Report where Kunal Vora, Head of India Equity Research, BNP Paribas shared his views on the sector with a detailed report.

Key takeaways include:

• According to the report, the Indian telecom industry’s revenue to rise c22% y-y and 3.4% q-q in Q1FY23 on the residual impact of tariff hike, an extra day during the quarter and 4G upgrades. It is believed that the subscriber clean-up phase for the industry is over and expect modest industry subscriber growth. Multiple headwinds are expected to 4G upgrades in the near term including increased cost of smartphones, higher cost of service and high inflation impacting the consumer’s wallet.
• Bharti Airtel’s India mobile revenue In 1QFY23 is expected to rise by 4.5% q-q on the residual impact of the November 2021 tariff hike, with 4% q-q rise in average revenue per user (ARPU) to INR185 from INR178 in 4QFY22. We expect muted 4G subscriber addition at c3m.
• Operators remain confident of taking one more tariff hike in FY23 and we see a high likelihood of that as we expect the industry to prioritize profitability over incremental customer addition opportunity.
• The report also predicts, Airtel’s India non-mobile business, including broadband and enterprise,to maintain a strong growth trajectory, with the telco gaining revenue market share across divisions. According to Kunal Vora, Head of India Equity Research, BNP Paribas, Airtel’s consolidated revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to rise c22% and 28% y-y. while for Reliance Jio, revenue is expected to rise 4% q-q, led by c5% q-q increase in ARPU, with a modest q-q increase in the subscriber base, while data volume growth q-q should continue to be moderate. It is expected that y-y EBITDA growth for Airtel (India mobile), Jio and VIL, will be nearly c35%, c29% and 21% respectively.
• The report in its overall view remains positive about Airtel and RIL, it said that Airtel seems well-positioned to report strong revenue growth and improvement in profitability, led by higher tariffs and market share gains, while RIL’s consolidated 1QFY23 EBITDA to rise c21% q-q on a strong performance by the O2C business, aided by strong global refining margins.