Telecom revenues of private mobile operators expected to grow 20-25% in current fiscal year: report

The turnover of three private mobile operators is expected to grow by 20-25% in the current financial year thanks to a solid increase in average revenue per user (Arpu) due to tariff increases. According to Crisil, Arpu is expected to grow 15-20% in FY23 due to rate increases undertaken by companies in November 2021, as well as another increase expected in the second half of this year.

As players are expected to gradually spend on network and regulatory investments in FY23, Arpu’s growth and rate hikes could ease pressure on their books. “As a result, the earnings of the top three players are expected to increase by 20-25% this fiscal year. Earnings before interest, taxes, depreciation and amortization (Ebitda) is expected to increase 180 to 220 basis points for the year,” Crisil said in a statement.

Telco industry analysts say telcos are likely to announce further price hikes, most likely after 5G spectrum auctions, to improve Arpu and weed out low-paying active subscribers. Arpu’s growth is essential to achieving a healthy bottom line and maintaining profitable growth. Lower Arpu limits players’ ability to invest in network and spectrum, resulting in poor service offerings. Over the years, players have witnessed a muted Arpu due to the price war, thus limiting their network investments, increasing their leverage and hurting their profitability.

However, the earlier apprehension regarding the rate hike appears to have faded as, despite the hikes undertaken in November 2021, the industry’s active subscriber base has grown over the past few months. What carriers lost were low-end customers, who were mostly idle, ie having more than one or two connections.

The three private players lost 37 million subscribers last year, as SIM card consolidation wiped out inactives. But their active subscriber base grew 3% year-over-year to 29 million. According to Crisil, Reliance Jio saw its total subscriber base drop between August 2021 and February 2022. However, the share of its active subscribers reached 94% in March 2022, compared to 78% in the first quarter of the previous fiscal year as as an active subscriber. basis remained unchanged due to SIM consolidation.

Similarly, Bharti Airtel added 11 million active subscribers in fiscal 2022 and its percentage of active subscribers increased to 99% in the fourth quarter. Vodafone Idea, however, lost 30 million active subscribers in fiscal year 2022. “It continued to see a decline in its subscriber base due to low 4G investment and deteriorating services, while that its peers have gradually invested in 4G sites,” Crisil said.

Vodafone Idea’s decline in subscribers led to a loss of its leadership in circles. It lost active follower leadership in five circles, while Reliance Jio gained six more. Interestingly, the increase in active subscribers has been driven by an increase in rural subscribers in category A, B, and C circles. Crisil expects rural teledensity to increase over the course of the year. 2023, contributing to a 3-5% increase in total wireless subscribers, while the active subscriber base is expected to grow faster by 4-6%.