Connect with us

Headlines of the Day

Jio, Bharti continue to grow on higher tariff, more subscribers

Fitch Ratings forecasts the Indian telecom industry’s mobile segment EBITDA to increase by at least 40% in the financial year to end-March 2021 (FY21), compared with 25% in FY20, following strong performances by market leader Reliance Jio, the telecom unit of Reliance Industries Ltd (BBB-/Stable), and second-placed Bharti Airtel Limited (BBB-/Negative) in 9MFY21.

EBITDA growth at Jio and Bharti will be driven by higher tariffs, user migration to 4G and high monthly data usage of 12GB-16GB per user as pandemic-led restrictions encouraged users to work from home and use remote-access technologies.

Jio’s revenue and EBITDA grew by 33% and 50%, respectively, yoy in 9MFY21, while Bharti reported Indian mobile revenue and EBITDA growth of 26% and 48%, respectively, during the same period. Jio , which leads the mobile market with 411 million customers, added 41 million subscribers during last four quarters and increased its monthly average revenue per user (ARPU) by 18% yoy to INR151 (USD2).

Bharti gained 25 million customers to reach a total subscriber base of 308 million, higher than our expectations, and reported a 23% yoy rise in monthly APRU to INR166, driven by a 34% increase in 4G customers to 165 million, 20% growth in monthly data usage per user to 16.7GB, and a 14% rise in voice usage to 1,027 minutes.

Jio and Bharti will likely increase their combined revenue market share to 80% (December 2020: around 75%), at the expense of third-placed Vodafone Idea, which will lose 50 million-70 million subscribers in the next 12 months.

We forecast industry monthly ARPU to grow by 5%-10% in FY22 as 2G and 3G customers gradually move to pricier 4G price plans. Another tariff increase is possible in 2021 because the struggling Vodafone Idea, whose ARPU is 30% lower than Bharti’s, may raise tariffs to improve cash flows. ARPUs have been rising since December 2019, when all telcos raised them by around 30%.

The pandemic-led economic slowdown has had little impact on Indian telcos, as data traffic continues to increase even after the lockdowns were lifted. Migration of users to 4G will likely accelerate as Indian smartphone shipments sharply rebounded in 2H20, according to analysis firm Canalys.

Sector capex is likely to remain flat in FY22, barring spectrum payments, as both Bharti and Jio front-loaded investments to expand 4G coverage and capacity and built up fibre networks and in-building coverage. Bharti could generate small positive free cash flow in FY21, as operating cash generation is likely to rise and will be used to fund flat core capex, excluding one-time spectrum payments and adjusted gross revenue dues.

We believe that Bharti and Jio are likely to bid to renew their expiring spectrum in the upcoming auctions in March 2021 and may also bid to acquire spectrum in the sub-1GHz band, which can be used for 5G services. We have assumed Bharti will set aside USD500 million in FY21 and USD1 billion in FY22 for upfront spectrum investments. We believe that the company is unlikely to launch 5G services before 2022.

The Negative Outlook on Bharti’s IDR reflects the Negative Outlook on India’s Long-Term Foreign-and Local-Currency IDRs (BBB-). It does not reflect our view of its underlying credit profile, which has been improving, benefiting from strong growth in the Indian and African wireless operations. Bharti’s African subsidiary, Airtel Africa, also reported strong results with revenue and EBITDA rising by 13% and 26%, respectively, on a reported currency basis during 9MFY21, led by an 11% increase in subscribers to 119 million and 9% growth in ARPU to USD2.9.
CT Bureau

Copyright © 2022 Communications Today

error: Content is protected !!