Telecom stocks: Expect tariff hikes from Bharti Airtel, Vodafone Idea, Jio after Lok Sabha election to drive higher ARPU

Telecom companies Bharti Airtel, Reliance Jio and Vodafone Idea reported earnings for the fourth quarter of FY24 broadly in-line with Street estimates. While Bharti Airtel sequentially gained around 6.7 million mobile subscribers in India wireless, Reliance Jio added around 10.9 million subscribers in the quarter to reach 482 million users.

Both Airtel and Reliance Jio have been gaining subscriber market share at the expense of Vodafone Idea as the beleaguered telecom operator lost 2.6 million subscribers QoQ.

The Average Revenue Per User (ARPU) for the telecom sector continues to grow led by a migration to 4G from 2G and growing postpaid mix. Bharti Airtel continued to maintain industry leading In India wireless ARPU at ₹209 for the quarter up from ₹208 in Q3FY24.

Also Read: Bharti Airtel Q4 results: Net profit declines 31% to ₹2,072 crore; 4 key highlights from earnings

Reliance Jio reported sequentially flat ARPU at ₹182 per month, while Vodafone Idea’s APRU was at ₹146 versus ₹145, QoQ.

The industry saw some stability led by telecom reforms in September 2021 and tariff hikes in December 2019 and November 2021. Analysts at Centrum Broking expect another round of broad-based tariff hike in the prepaid segment after the ongoing Lok Sabha elections 2024.

“The telecom industry needs another round of tariff hike which along with 2G to 4G migration would help to drive an increase in ARPU and return ratios going ahead. Rising adoption of 5G would drive monetization through higher data usage and telecom operators are offering unlimited 5G data to drive 5G adoption,” said Piyush Pandey, Research Analyst at Centrum Broking.

Also Read: Vodafone Idea losses widen; telecom firm in talks with banks for debt funding

Meanwhile, Both Airtel and Reliance Jio continue to add on more cities to their 5G coverage with presence across most districts of India. For Jio, almost 108 million subscribers have migrated to 5G compared to 72 million for Bharti Airtel.

“5G implementation has led to a big jump in data capacity of telcos and it contributes a big chunk of total wireless data traffic for telecom operators. However, they are still working on a strategy for effective monetization of 5G rollout,” Pandey said.

Meanwhile, Indus Towers continues to see strong Tower and Colocation addition led by demand from 5G rollout and one of the telecom operators investing significantly in expanding its rural coverage.

Also Read: Vodafone Idea's ₹18,000-crore FPO subscribed more than 6 times, led by QIBs

The tower infrastructure company is expected to see early resolution to its receivables issue with the successful fund raise by Vodafone Idea.

Among telecom stocks to buy, Bharti Airtel is Centrum Broking’s top pick in the sector. The brokerage firm has an ‘Add’ rating and Bharti Airtel share price target of ₹1,448 apiece.

Centrum Broking has a ‘Sell’ call on Vodafone Idea shares with a target price of ₹11 apiece. It has an ‘Add’ rating on Indus Towers shares and a target price of ₹375 apiece.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.