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Telcos revenue likey to go up by 13% this year

2022 will likely be the year for greater average revenue per user (ARPUs) as tariffs and 4G penetration continue to rise, according to analysts.

With 5G auctions expected this year, analysts also expect the 5G transformation to commence along with a possible initial public offering for Reliance Jio. The battle for telecom services beyond 4G will likely be restricted to the top two operators — Reliance Jio and Bharti Airtel.

While Jio may maintain its market share supremacy, with a 44 per cent market share by revenue at the end of 2022, analysts expect Bharti Airtel to maintain its strong performance of 2021 for this year as well. According to analysts, Bharti Airtel will not only retain its market share at 34 per cent but may bolster its share as well.

Analysts expect that the first expects of the telecom tariff hikes will be seen in the quarter ending on December 30. Sim consolidation is to be expected in the aftermath of the tariff hikes, while EBITDA for all of the operators is expected to rise.

According to CLSA’s 2022 outlook report, major developments in the telecom industry including tariff hikes, telecom relief package as well as rising momentum in the 5G race could mean major innings for the sector for 2022.

The key trends to look out for according to CLSA, include strong revenue growth in 2022. After a 15 per cent rise in revenue for the sector overall for 2021, experts believe that revenues will rise by another 13 per cent, as telcos push subscribers to upgrade to 4G tariff plans and tariff rise by another 20 per cent, between the second half of FY22 and FY24. 4G mobile data penetration is set to increase to 83 per cent from 66 per cent in 2021. Rising mobile ARPU, 4G penetration, potential AGR review and next spectrum EMI due in FY26 will allow sector improvements according to the CLSA report.

“Meanwhile, pricing-led competition is easing and even as we forecast RJio revenue share to reach 44 per cent by FY24, we also foresee upside potential to Bharti Airtel’s 34 per cent share” CLSA report said.

5G battle
“We believe Bharti Airtel and RJio will largely bid for pan-India 5G spectrum and VIL may bid selectively” according to a Bank of America report. Therefore the battle beyond 4G is likely to be restricted between the top two operators only, “(The battle) is in digital services, home broadband and enterprise offerings and in 2022 will spill to 5G with India commencing 5G transition” noted CLSA.

“2022 will also be decisive for RJio to create an ecosystem of own apps vs Bharti Airtel’s digital services under #airtelThanks to boost subscriber base and ARPU.” noted the CLSA report.

Another potential development to look out for in 2022, is the Reliance Jio IPO according to experts.

As for the expectations for Q3FY22, ICICI securities said, “Q3FY22E is expected to be steady as the impact of tariff hike of 20-21 per cent on the prepaid category in December 2021 had limited flow-through into revenue. Bharti, Vodafone Idea and Reliance Jio will see ARPU growth of 6.6 per cent, 4.2 per cent, 5 per cent QoQ to ₹164, ₹114, ₹151, respectively in Q3FY22.” The Hindu BusinessLine

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