FREE virtual training session on Passive Income Secrets: October 24 and 25, 2020, 10am to 1pm. Register Now!
you are here: HomeNewsBusiness
Last Updated : Oct 12, 2020 05:37 PM IST | Source: PTI

Telecom ARPU poised for 'structural uptrend' via tariff hike, high data usage post COVID-19: Report

The note by JM Financial titled `A tale of supremacy, defence and survival’ said with consolidation of India’s telecom industry largely complete, the wireless industry’s revenue is expected to double to about Rs 2,60,000 crore by 2024-25 as ARPU hike looks "inevitable".

  • bselive
  • nselive
Todays L/H

Telecom industry Average Revenue Per User (ARPU) is expected to see a 'structural uptrend' through a mix of tariff hikes, either regulator or market driven, as well as higher data usage post-COVID-19, a report said on Monday.

The note by JM Financial titled `A tale of supremacy, defence and survival’ said with consolidation of India’s telecom industry largely complete, the wireless industry’s revenue is expected to double to about Rs 2,60,000 crore by 2024-25 as ARPU hike looks "inevitable".

”…we expect the wireless industry’s revenue to double to Rs 2,600 billion by FY25… as an ARPU hike looks inevitable given the industry’s future investment needs requires an ARPU of Rs 230-250 by FY25… for a pre-tax RoCE (return on capital employed) of 12-15 per cent to justify capex; and to avoid a duopoly market VIL needs APRU of at least Rs 190-200 by FY23 to survive,” said the report.


Fibre-to-the-home and enterprise connectivity businesses, which are still at a nascent stage, could emerge as the new growth engines, it added.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

"We expect industry ARPU to post a structural uptrend via a mix of tariff hikes either regulator driven or market driven; and higher data usage post-COVID-19,” it said.

The report said though the timing of the tariff hike is "uncertain" in the near term given high competitive intensity, regulatory intervention to protect industry health can be expected, in case there is a significant delay in a market-driven tariff hike.

"Further, we believe that the major capex cycle for the industry has been completed and, together with improving revenue and EBITDA (Earnings before Interest Tax Depreciation and Amortisation), would improve the RoCEs of industry players,” it said.

The report also said that Jio’s recent aggressive pricing in post-paid and Fibre-to-the-Home plans should be seen in the context of its low 5-10 percent market share in both segments.

"Hence, it should not be construed as Jio following a similar strategy as in the pre-paid segment, given it has achieved market leadership here and is on track to its about 50 percent RMS (revenue market share) target,” it said.

It predicted that strong subscriber additions will continue for Jio.

"We expect Jio’s strong subscriber additions to continue; hence, we expect Jio to attain 50 percent RMS target by FY25… at the cost of VIL, while Bharti is likely to defend its 30 percent RMS,” it said.

Asserting that timing of the hike "is uncertain", it added that Jio and Bharti are likely to be the major beneficiaries of a tariff hike going forward.

On Jio, the report said the company is "aiming for supremacy”, while for Bharti Airtel it said the telco is "strongly defending its fort despite an aggressive price war”.

On Vodafone Idea Ltd (VIL), the report flagged "too many unknowns”.

It noted the clarity on the payment schedule post the Supreme Court order as well as the company’s fund raising initiatives but added "only a significant and sustainable increase in ARPU can ensure that VIL survives in the long term, with a sizeable subscriber market share”.

On telecom tower company, Bharti Infratel, the report said that duopoly market risks cloud the long-term growth potential.

Disclaimer: “Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.”
First Published on Oct 12, 2020 05:37 pm