Telecom tariff hike of 15-17% post-election imminent

The telecom industry is expected to take 15-17% tariff hike post general elections. Terming the tariff increase in the sector as "imminent", analysts suggest that Airtel will be the biggest beneficiary.

The general election in the world's largest democracy is scheduled to be held in seven phases between April 19 and June 1, and results will be declared on June 4.

"We expect the industry to take a 15-17% tariff hike post the elections," states a report from Antique Stock Broking.

The report stated that the last hike of about 20% took place in December 2021.

The report predicts Bharti’s current ARPU (Average Revenue Per User) of Rs 208 may increase up to Rs 286 by end of FY27 and it will be triggered by factors like a Rs 55 contribution from a tariff hike, Rs 10 from the migration of 2G customers to 4G, and a Rs 14 gain from customer upgrades to higher data plans (both 4G and 5G) and transitions to postpaid services.

expect Bharti's subscriber base to grow at about two per cent per annum, against the industry growth of one percent per annum," it said.

Antique Stock Broking expects that Airtel will see the most prosperous financial phase in over 10 years. A tariff increase will fuel this upswing, the transition of 2G customers to advanced technologies, substantial growth in enterprise and Fiber-to-the-Home sectors, and a reduction in capital expenditure following the rollout of 5G, all expected to occur within the next three years.

"While challenges do exist as Bharti has chosen a different 5G rollout path versus key competitors, we believe it is unlikely to dent Bharti's subscriber base or growth significantly. We also believe valuations do not reflect the emerging highly positive macro telecom sector environment," it noted.

The report also mentions the declining market share of Vodafone Idea and Bharat Sanchar Nigam Ltd. (BSNL). While Vodafone Idea is facing financial difficulties, the latter – BSNL is encountering execution challenges.

"While Vodafone Idea is down from 37.2% in September 2018 to almost half at 19.3% in December 2023, Bharti's market share is up from 29.4% to 33% during this period. Jio is the biggest gainer, rising from 21.6% to 39.7%," it said.