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India strategy 4QFY24 review report: Telecom by MOFSL

Tariff hikes likely to drive future growth The telecom sector registered a sequential revenue growth of 2%, led by a 1.5% increase in subscribers, while ARPU was marginally up. This growth was on the back of ongoing transitions from prepaid to postpaid plans, the migration of subscribers from 2G to 4G networks, and effective data monetization strategies. The market share shift continues. The recent 5G ramp-up has not contributed meaningfully to revenue growth. Companies remain focused on deleveraging their balance sheets, and it is anticipated that capex will moderate in FY25 for Bharti/RJio. VIL’s capex would remain between INR500b and INR550b over the next three years to support network upgrade.

Market share gains continue for RJio/Bharti; VIL’s subscriber loss ebbs

  • RJio and Bharti continue to gain subscriber market share and revenue, albeit at a slower pace. RJio/Bharti added 11m/7m subscribers (1.9%/2.3% growth) against VIL’s loss of 2.6m subscribers (1.2% QoQ decline). The rate of subscriber loss for VIL became slightly better, with a loss of 2.6m subscribers in 4QFY24 against the average decline of 4m subscribers per quarter witnessed over the last eight quarters. Companies continue to witness consistent growth in 4G subscribers, with both RJio/Bharti gaining around 11m/7.8m 4G subscribers in 4QFY24. VIL’s 4G subscriber’s additions were 0.9m sequentially.

ARPU marginally up; all eyes on tariff hikes

  • Companies expect price hikes may result in some consolidation, but only in dual SIMs or multiple SIMs. However, the market can absorb the price increase. The price increase may not be as high at the entry level. Bharti reiterated its goal to reach an ARPU of INR300, which will require a couple of rounds of price hikes. In addition, management is waiting for the right time to implement tariff increases, as if competition does not follow suit, it will hurt Bharti. RJio’s ARPU was flat QoQ at INR182, while Bharti/VIL’s ARPU improved to INR209/INR146 (+INR1 each) in 4QFY24. The moderate increase in ARPU was due to one day less in 4Q. Margin profile remains stable The incremental margin remained at a steady 59%. Margins improved, led by lower network operating costs, even in the aggressive rollout phase. RJIO/VIL reported 10bp QoQ margin improvements to 52.4%/40.9%. Bharti (India Mobile)’s margins remained stable at 55.1%.

For report,

CT Bureau

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