Bharti Airtel, Jio's Focus On Tariff Hikes To Aid Telecom Revenue, Jefferies Says

Telecom sector revenue is likely to rise, driven by carriers’ focus on higher average revenue per user and as tariff hikes settle in, according to Jefferies.

Sector revenue is expected to grow from $25 billion (about Rs 1.95 lakh crore) at present to $36 billion (Rs 2.81 lakh crore) by FY25, the research house said in a June 13 report. The current full-year revenue was also at an all-time high, with growth driven by metros and C-circles—relatively smaller geographical areas.

“In this regard, the recent shift in focus toward tariff hikes by Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd. is a step in the direction.”

In FY22, Jefferies said, while Reliance Jio and Airtel accounted for the entire incremental revenue of the sector, Vodafone Idea Ltd. was able to maintain its revenue—the first time in five years.

“As a result, Bharti and Jio’s revenue grew 21% and 18% year-on-year, and they gained 220 basis points and 180 bps market share, respectively. Even though Vodafone Idea’s market share declined 240 bps, its market share has been fairly stable at 18-19% for the past four quarters.”

Vodafone Idea’s ability to control revenue decline and steady market shares over FY22, according to the report, suggests that accelerated market share shifts are unlikely in the near term.

Bullish On Airtel

Bharti Airtel reported higher incremental revenue than Jio for the first time ever in FY22.

Jefferies reiterated its ‘buy’ rating on the Sunil Mittal-led carrier, given its leadership in market share gains in the past fiscal. While Airtel’s growth was driven by ARPU growth, Jio was driven by subscriber growth, it said.

CLSA, too, sees Airtel as “best placed” to play the sector’s growth with rising ARPU and 4G penetration at 62% of its own mobile subscribers.