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CapEx for RJio and Airtel will remain elevated in 2QFY24, BNP

Days for profitability may be finally in sight for Airtel and Reliance Jio. According to analysts, top two telecom operators, Reliance Jio and Bharti Airtel, are likely to post improved profitability and cash generation through fiscal 2025. This, according to them, is possible on the back of a likely moderation in 5G capital expenditure and customer churn from this quarter, FY24 onwards.

In an analysts note, BNP Paribas said, “Capex will remain elevated in 2QFY24, but we expect moderation in 2HFY24, which will help improve profitability and cash generation…Airtel and Jio are well positioned over the medium-term with growth levers such as subscriber upgrades, market share gains and tariff hikes that are just a matter of time.”

Reliance Jio and Airtel managements have been guiding for a moderation in network capex from FY25 onwards. This is likely to be possible with accelerated pan-India 5G rollouts likely to be concluded by December 2023 and March 2024, respectively.

“Bharti’s management capex guidance implies (annual) India business capex could decline to Rs 20,000 crore from FY25 (versus Rs 28,000 crore in FY23 and a similar guidance in FY24), though we continue to conservatively build in Rs 27,000 crore for FY25,” JM Financial said as per the report.

5G monetisation still far
Analysts still do not see companies seeing serious monetisation of 5G services. Reliance Jio and Airtel recently took first steps by launching AirFiber or 5G-based fixed wireless access (FWA) services in a few markets. This may finally lead to some 5G monetisation for these brands.

One year of 5G rollout in India
Both Reliance Jio and Airtel have been expanding their networks since the launch in October 2022. Reliance Jio is said to have more than 62 million 5G users, while the number for Airtel is over 50 million subscribers. Vodafone Idea (Vi) is yet to start the rollout of its 5G services.

Last month, Jio launched its Jio AirFiber services in eight cities — Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune. Rival Bharti Airtel was the first to launch 5G-FWA services in Delhi and Mumbai.

Jio began the commercial rollout of its 5G services in four cities from Diwali. Jio is using a standalone (SA) architecture, while Airtel is using a non-standalone (NSA) architecture for their 5G networks.

As per Reliance Industries (RIL) ‘s Q1FY24 presentation, Jio has deployed over 115,000 5G sites and nearly 690,000 5G cells pan-India. It added that the “rollout is significantly ahead of plan”, and mentioned that Jio’s 5G network now covers over 90% of census towns. ToI

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