Reliance Jio and Bharti Airtel, two of India’s leading telecom operators, are expected to capture 80-85% of the revenue of private telecom companies in 2024, according to Fitch Ratings. This is due to their fifth-generation (5G) services, which continue to attract subscribers from smaller operators.
The regulatory environment and risk factors have improved for Airtel, with its score being revised upwards to ‘bbb’ from ‘bb.’ This reflects the transition towards a more transparent regime in the Indian telecom industry.
In the past, the industry faced high regulatory risks and troubles, including scandals related to spectrum allocation and disputes over taxes. However, the Indian government has taken steps to alleviate the financial burden on the industry. This includes deferring spectrum liability payments, reducing the base price of lower bandwidth spectrums, and decreasing the spectrum usage charge.
The government has also allowed adjusted gross revenue penalties to be paid in annual instalments and provided a moratorium for these payments. Additionally, the government converted deferred spectrum liabilities into equity for Vodafone Idea, the third-largest Indian telecom company, to promote greater competition.
Fitch’s analysis of the telecom industry in Asia Pacific and Southeast Asia suggests that India and Indonesia will accelerate their 5G investments over the next few years. However, 4G networks will remain dominant in these markets.
The success of Malaysia’s shared national 5G network will depend on a transparent wholesale regulatory regime and pricing framework. Progress has been made in Indonesia’s long-awaited 5G spectrum auction, with the freeing up of the 700MHz band and the release of draft regulations on radio frequency usagethe government.
Fitch also projects that after subscriber penetration reaches a majority of users, the growth of wireless revenue due to 5G migration will slow down. In Korea, 5G penetration is expected to surpass 60% with around 34 million subscribersthe end of 2023. Singapore, on the other hand, has experienced more intense competition than anticipated, leading to lower average revenue per user and profitability despite early 5G adoption.
To compensate for weakening wireless growth, telcos are exploring non-telecom operations such as corporate services, including cloud services and data centers. Fitch predicts that investment to boost growth will increase in the medium term.
Overall, Reliance Jio and Bharti Airtel are poised to dominate the Indian telecom industry’s revenue, thanks to their 5G services. The regulatory environment has improved, and governments in Asia Pacific and Southeast Asia are pushing for 5G investments. However, the future growth of wireless revenue will slow down, leading telcos to seek opportunities in non-telecom sectors. OPP Today