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Telecom top three leave Covid woes behind with 19% YoY growth in March quarter revenue

Brokerages believe that the improvement in the ARPU of the sector is only getting started

Mumbai / June 02, 2022 / 01:54 PM IST
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The domestic telecom sector seems to have left the pandemic woes behind with faster growth, improving operational health, and greater focus on profitability.

The Covid-induced lockdowns and other containment measures across 2020 and 2021 breathed fresh life into sector after years of distress and investors found sanctuary for growth amid worsening economic uncertainties. Brokerage firm CLSA India called the telecom sector a ‘growth haven’ with the top three players – Bharti Airtel, Reliance Jio Infocomm and Vodafone Idea – reporting a revenue growth of 8 percent on a sequential basis and 19 percent on-year in the March quarter.

“The market structure has become more favourable, with two strong players and two weak players, and regulations have become supportive on structural and liquidity measures announced by the government,” brokerage firm Morgan Stanley India said in a recent note.

The operational performance of the three major players was the highlight of the March quarter as average revenue per user (ARPU) grew 8-11 percent on a quarter-on-quarter basis aided by tariff hikes taken by the sector in recent years.

Brokerages believe that the improvement in the ARPU of the sector is only getting started with expectation that the metric will cross the Rs 200 per user-mark soon. “A tariff increase is likely and in the smartphone user segment, which has been resilient,” brokerage firm CLSA India said in a note.


The operating margin of the three telecom operators also improved sequentially by 88-380 basis points to 20.6-50.8 percent with Bharti Airtel retaining its dominance as the company with the highest operating margin in the sector.

Companies like Bharti Airtel have expressed optimism that revenue per user will steadily move towards the Rs 200 mark and later towards the Rs 300 per user mark, which it feels is the right level for the industry to operate at.

“Do not forget the ARPUs that we have here are really very modest. We are at the lowest tariffs anywhere in the world, and my view is that at the right point in time moving up tariffs will be very easily absorbed here,” Gopal Vittal, managing director and chief executive officer at Bharti Airtel, told analysts in a post-earnings conference call.

Morgan Stanley expects industry’s ARPU to grow by about more than 50 percent over the next four-to-five years, with revenues expanding to more than double of 2021-22 level. Commentary from the likes Bharti Airtel have banished concerns that rising domestic inflation will deter companies from raising tariffs later this year.

On the subscriber front, the ongoing consolidation at Reliance Jio marred an otherwise healthy quarter for telecom operators. Bharti Airtel added more than 3 million net new users during the quarter whereas Reliance Jio lost 10.8 million and Vodafone Idea lost 3.4 million subscribers.

However, fourth-generation user growth was strong from Bharti Airtel and Vodafone Idea as they added 5.2 million and 1.1 million new users, respectively, in the March quarter.

“Telcos have been resilient in our coverage YTD against rising interest rates & inflation concerns. While other sectors in our coverage have seen more adverse effects, telcos have outperformed with their positive outlook & lower relative valuation,” brokerage firm Bernstein India said in a post-earnings note.

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Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Chiranjivi Chakraborty
first published: Jun 2, 2022 01:22 pm
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