Jio, Airtel Tariff Hike To Help Telecom Sector Gain Rs 20,000 Crore: ICRA

The latest telecom tariff hikes announced by telecom companies are projected to generate additional operating profit of around Rs 20,000 crore for the industry once fully implemented, according to Investment Information and Credit Rating Agency of India Ltd.

With improved financial metrics, the telecom industry will have the capacity to undertake deleveraging and fund capital expenditure for technology upgrades and network expansion, said Ankit Jain, vice president and sector head of corporate ratings at ICRA.

This outlook from the domestic rating agency follows the announcement by Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd. of tariff hikes ranging from 10-27%, marking the first significant increase in telecom tariffs in two-and-a-half years.

"The latest round of tariff hikes wherein the telcos increased the prepaid tariffs by around 15-20% will provide the traction in the Average Revenue Per User levels and can result in additional operating profit of around Rs 20,000 crore for the industry once these hikes are fully absorbed," ICRA said.

It expects the industry revenue to grow by 12-14% in fiscal 2025, which given the operating leverage, is likely to translate into healthy expansion in operating profit by 14-16%. "This, in turn, is likely to result in improvement in industry Return on Capital Employed to more than 10% in 2025," an ICRA statement said.

It expects the industry to report revenue of Rs 3.2-3.3 lakh crore, with operating profit of Rs 1.6-1.7 lakh crore in fiscal 2025.

Industry debt levels are expected to "moderate" and thereafter, continue on a path of improvement, given the increase in operating profit coupled with the muted action in the latest spectrum auctions and expected moderation in the capex intensity.

"...The debt levels are expected to moderate to around Rs 6.2-6.3 lakh crore as on March 31, 2025, with expectation of further decline going forward," Jain said.

This is likely to result in steady improvement in debt metrics with industry debt/OPBDITA at 3.7-3.9 times and interest coverage at 3.1-3.3 times for FY25.

Bharti Airtel announced an increase of 10-21% in prepaid and postpaid mobile charges on Friday, following a similar increase by competitor Reliance Jio. On Thursday, Reliance Jio had disclosed a 12-27% surge in mobile rates.

Effective from July 3, Airtel's daily data add-on (1GB) will rise from Rs 19 to Rs 22. The 365-day 2GB per day plan will increase by Rs 600, from Rs 2,999 to Rs 3,599. The unlimited voice plan with 2GB data for 28 days will go up from Rs 179 to Rs 199. Airtel stated the price increase for entry-level plans is kept modest to minimise impact on budget-challenged consumers.

(With inputs from PTI.)