Recovery to continue for India’s telecom sector in FY22

India’s telecom sector will continue on the path of recovery in the next financial year starting 1 April, amid consolidation that will lead operators to focus on digital transformation of their businesses.

According to India Ratings and Research, the second round of consolidation in the industry, which has kicked in, will drive telecom companies from being providers of traditional voice-only services to complete digital solutions for households that would enable customer retention.

Also, conducive regulatory environment will improve the sector’s performance. The credit rating agency has maintained a stable outlook for the telecom sector in FY22.

“Providing one or more of the services such as broadband services, cable TV services (direct-to-home), enterprise solutions (B2B), e-payment wallets/platforms, music applications and over-the-top (OTT) transmission platform, in a bundled form along with the traditional wireless mobile services has now become the need of the hour, to ensure customer stickiness and widen the market footprint,” it said.

The surge in data usage in the past one year and rising proportion of high-paying customers indicates that the sector is moving towards higher average revenue per user (Arpu), despite no tariff hikes. Competition among telcos has also intensified, as is evident from narrowing tariff differentials.

The development in the coming quarters will be key to the sector as it will determine whether “India’s mobility market will remain a 3+1 player market or will transition to a 2.5+1 player market, and how telcos will respond to the next phase of consolidation in the industry”, India Ratings said.

It should be noted that the entry of Mukesh Ambani-led Reliance Jio Infocomm Ltd in September 2016 in the country’s telecom space and its almost-free voice and data services caused massive disruption, forcing other players to drastically cut prices. Since then, while most firms exited their businesses, only Bharti Airtel Ltd and Vodafone Idea Ltd survived the brutal tariff war but continue to deal with high levels of debt.
In the December quarter, revenues of telecom sector rebounded to levels seen in the years prior to Reliance Jio’s launch. Net mobile revenues rose 4.5% sequentially to $25 billion in October-December, according to data issued by the Telecom Regulatory Authority of India (Trai). The last time the sector earned $25 billion was in the June quarter of calendar year 2016.

The average revenue per user (Arpu), a key performance metric, of Bharti Airtel plunged to Rs100 per month in Q2FY19, from Rs196 in the first quarter of fiscal 2017. Prior to its merger with Vodafone, Idea’s Arpu stood at Rs181, which fell to a record low of ₹88, for the combined entity in the September quarter of 2019.

Jio had an Arpu of ₹131.7 in the September quarter of 2019. Livemint