Connect with us

Headlines of the Day

Telecom tariff hikes and data capacity surge coming in 2023, IIFL Securities

2023 will see mid-year tariff hikes and peak capex trebling data capacity for Reliance Jio Infocomm Ltd. and Bharti Airtel as they roll out 5G, according IIFL Securities.

“We expect 4G prepaid tariff hike towards the middle of 2023, while data usage-driven ARPU uplift linked to 5G uptake will be more gradual,” the brokerage said in a Jan. 2 note.

Bharti Airtel and Jio have talked about rapid 5G rollout. Jio is targeting pan-India 5G coverage by Dec. 2023, while Bharti Airtel aiming for 5G coverage in top 5,000 towns and cities by March 2024.

Jio is targeting to take its 5G unique location count to 200,000 by Dec. 2023, and these locations would be two-thirds of its 4G unique locations. “Our channel checks suggest Bharti would not be very far behind at 150k 5G unique locations by March 2024,” the note said.

Capacity Increase To Accommodate 5G Traffic
According to IIFL Securities, data usage per subscriber for Bharti Airtel has risen at 11% CAGR over FY19-22.

The rise comes on the back of upgrades from 3G to 4G, increase in hours of data consumption, higher feed density and improving pixel density of handsets.

“With more recently added subscribers probably consuming less data, the older cohort of subscribers have perhaps seen a sharper rise in per-capita data usage,” the note said.

Jio’s jump is higher at 19%, which is influenced by inclusion of FTTH traffic. “We estimate per-capita mobile data usage CAGR at 12% is similar to Bharti’s.”

The brokerage estimates the total capacity of the top two telecom companies—Jio and Bharti— to almost treble from 500 pentabytes a day in September 2022 to 1,400PB a day by March 2024. “The capacity should be adequate for handling traffic requirements for two to three years, especially with handsets likely to be the near-term limiting factor for 5G adoption.”

4G Prepaid Tariff Hike In Mid-2023
According to IIFL Securities, the 5G related average revenue per user upliftment is likely to be insignificant in near future and 4G prepaid tariff hike remains the most important average revenue per user lever for telecom companies.

“Considering different factors mentioned earlier, we see higher probability of 4G prepaid tariff hikes in mid-2023.”

Pushing tariff hikes closer to 2024 elections raises the risk of political backlash, the brokerage said. A mid-2023 increase would also ensure the tariff hike is absorbed, forgotten and not too fresh in public memory before the election campaign heats up.

JIO’s & Bharti’s FY24 Ebitda Vision
5G rollout would entail loading rental of 15-20% premium on existing towers, given that standalone 5G sites are still a few quarters away, according to IIFL Securities.

According to the note, Jio and Bharti Airtel will see significant increase in network operational expenditure as they incur 5G loading charges on towers and higher energy costs.

“This results in 8%/3% Ebitda cut for the two companies in FY24 and a smaller cut in FY25,” IIFL Securities said.

The brokerage reduced the price target for Bharti Airtel from Rs 929 to Rs 909 on Ebitda cut, implying a potential upside of nearly 12%. Bloomberg

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2022 Communications Today

error: Content is protected !!