Telecom companies gain on tariff hike; ARPUs to rise in fourth quarter
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Telecommunication (telecom) companies are expected to see strong quarter-on-quarter (QoQ) growth in average revenue per user (ARPU) in the fourth quarter (Q4) of 2021-22 on the back of recent hike in prepaid plans. While subscriber additions will be modest, telecom companies will see overall growth in their revenue, according to Q4 earnings estimates.
According to brokerages, Bharti Airtel could report 8-13.5 per cent QoQ rise in its ARPU to Rs 176-185.
Vodafone Idea’s ARPU could go up by 7-12 per cent to Rs 123-129 on a QoQ basis.
Reliance Jio’s ARPU is estimated to rise by 8-12.5 per cent to Rs 164-171.
According to Emkay Global, Q4 ARPU could reflect the full impact of the tariff hike implemented by telecom companies. However, with a high proportion of subscribers in long-dated recharges, Jio might only see partial benefits, it said.
Telecom companies hiked prepaid tariff plans by around 20 per cent end-November. The tariff hike had resulted in sequential improvement in ARPU in the third quarter (Q3) and company executives had said the effect of the hike would be visible in Q4 as well.
“We expect Airtel and Jio’s mobile revenue growth to pick up QoQ to 10 per cent. We expect revenue growth to be led by 10-12 per cent QoQ rise in ARPU for Jio and Airtel. Subscriber additions will remain muted on the back of tariff hikes and Jio’s subscriber clean-up. Margins should see sharp improvement due to higher ARPUs,” Jefferies said in its earnings preview.
While the tariff hike had led to ARPU improvement in Q3, it had also led to decline in customer base for telecom companies.
ICICI Securities believes that some of the gains of the tariff hike will be offset by consolidation of SIM cards and also due to two fewer days in Q4.
BNP Paribas expects the telecom industry’s revenue to rise by around 20 per cent year-on year and 9 per cent QoQ despite multiple factors affecting growth. “We expect a high level of resilience in consumer spending on mobile services,” it said.
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