While broadband penetration rises, ARPU declined in 4QFY21, India Ratings

As per the Telecom Regulatory Authority of India data, the industry-wide wireless subscriber base grew by strong 8.3 million subscribers in February 2021 to 1,168 million subscribers on a month-on-month (mom) basis, which is the highest addition in subscribers in a month in the last one and a half years. In February, Vodafone Idea Limited (VIL), which was consistently losing subscribers, reported growth in subscribers for the first time in February 2021 since October 2019. Therefore, in February 2021, the growth in industry wide subscribers was attributable to all the three large telcos, led by Reliance Jio Infocomm Limited (RJio; ‘IND AAA’/Stable; +4.3 million), followed by Bharti Airtel Limited (BAL; debt rated at ‘IND A1+; +3.7 million) and VIL (+0.70 million). The Visitor location register subscriber base, which shows active subscribers, also grew by 3.3 million subscribers mom in February 2021 to 982 million subscribers.

The number of broadband subscribers increased to 64% of the overall wireless subscriber base in February 2021 from 63% in January 2021 and 47% in March 2019. In February 2021, the number grew by strong 7.9 million (January 2021: 9.8 million). Additionally, the average data used per user is increasing rapidly. The sliding voice tariffs, growing data tariffs, increasing data usage per subscriber, increasing data subscribers in the overall subscriber base and reducing tariff differentials among the telcos, over the last one year, indicate that the industry is moving towards a higher average revenue per user (ARPU) regime. However, ARPU of the telcos reduced in 4QFY21, primarily due to a reduction of interconnect usage charges (IUC) charges to INR0.0 per minute w.e.f 1 January 2021 from INR0.06 per minute, while remaining higher than 4QFY20 ARPU on comparable basis. BAL reported a dip in its ARPU to INR145 in 4QFY21 (3QFY21: 166), while RJio reported a dip in its ARPU to INR138 (INR151). The agency believes that movement in the ARPU needs to be monitored over the next two to three quarters.

Other recent industry developments:
5G Spectrum Auctions: The agency believes that there are still many variables and unknows that need to be addressed for the successful implementation of the 5G technology in India, such as (a) reserve price for 5G auctions, (b) incremental users and ARPU and (c) capex to be incurred by telcos. The Department of Telecom is already considering a cut in the base price of 5G airwaves and the 700MHz band in addition to a lesser upfront payment, as per some of the news reports, which is yet to be announced and remains a key monitorable for 5G auctions.

Production-linked Incentive Scheme: The allocation of INR122 billion in the production-linked incentive scheme for telecom and networking products by the government for the next five years as part of 13 sunrise sectors indicates the government’s consistent, increased focus on the telecom sector. The scheme is likely to benefit telecom infrastructure providers since such players will get incentives on their incremental sales from locally manufactured products over the next five years compared to FY20 levels. CT Bureau