India Ratings and Research (Ind-Ra) has published the August 2021 edition of its credit news digest on India’s telecom sector.
It highlights the trends in the telecom sector, with a focus on subscriber additions, subscriber market share, broadband subscribers, data usage, pricing and regulatory and industry updates.
The key highlights of the report are as under:
BAL’s revision in select tariff plans – A move towards indirect tariff hikes and ARPU growth: The revision in the floor prices for select pre-paid and post-paid plans by Bharti Airtel Limited (BAL; debt rated at ‘IND A1+) in July 2021 will support its average revenue per user (ARPU) growth in the medium to long term.
This is because the telco is less likely to face competition from Reliance Jio Infocomm Limited (RJio; ‘IND AAA’/Stable) owing to almost similar entry-level plans in the pre-paid category and the sticky nature of subscribers in the post-paid category.
BAL discontinued its entry-level INR49 pre-paid tariff plan in the last week of July and now the INR79 smart recharge plan becomes the entry-level plan for BAL’s pre-paid customers (94.7% of customers in June 2021).
On the other hand, for post-paid plans, the telco also discontinued its INR749 family plan and now only INR999 family plan is available, while the entry-level plan for corporate customers was also revised to INR299 from INR199 and INR249 in July 2021.
The agency believes BAL’s step of indirect tariff hikes indicates that the industry is moving towards a higher ARPU regime.
Structural sector improvement continues; ARPU could grow even without tariff hikes: The number of broadband subscribers increased to 64.4% of the overall wireless subscriber base in May 2021 from 64.3% in April 2021 and 47% in March 2019.
In May 2021, while the number of broadband subscribers declined by 2.9 million (April 2021: up 5.1 million), the broadband penetration as percentage of overall subscriber base continued.
Additionally, the average data used per user is increasing rapidly.
BAL leads the industry with the highest reported average monthly data usage (GB), which grew to 18.9GB per user per month in 1QFY22 from 16.8GB per user per month in 4QFY21.
The sliding voice tariffs, growing data tariffs, increasing data usage per subscriber and increasing data subscribers in the overall subscriber base over the last one year, indicate that the ARPU of the industry could grow even without tariffs hikes.
Wireless and broadband subscribers base declined in May 2021: The industry-wide subscriber base declined by a sharp 6.3 million subscribers on a month-on-month (mom) basis in May 2021 to 1,177 million subscribers, as against consistent growth in subscribers since January 2021.
Additionally, the visitor location register subscriber base, which shows active subscribers, and was also rising since August 2020, dipped significantly by 11.3 million subscribers mom in May 2021 to 986 million subscribers.
Broadband subscriber base too reported a decline in May 2021 by 2.9 million subscribers to 758 million subscribers, the first ever mom decline since May 2020.
BAL reported a decline in wireless subscribers, active subscribers, broadband subscribers by 4.6 million, 5.7 million and 1.5 million, respectively in May 2021, as against a consistent increase for almost a year.
Ind-Ra believes movements in BAL’s subscribers needs to be monitored over the next three to six months.
RJio continued the uptrend and reported an increase of 3.6 million subscribers mom in May 2021, along with a rise of 2.8 million active subscribers and an addition of 3.8 million broadband subscribes.
Vodafone Idea Limited reported a loss in subscriber base again in May 2021.