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Bharti Airtel, Reliance Jio free cash flow to rise with falling capex and growing ARPU

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In Short:

Bharti Airtel’s free cash flow is expected to reach Rs 56,000 crore in FY26, while Reliance Jio’s is projected to rise to Rs 38,500 crore. Analysts predict that average revenue per user (ARPU) in the telecom sector will increase to Rs 270-300 in the next 3-4 years. Airtel and Jio are likely to gain revenue market share from Vodafone Idea as they continue to expand their 5G networks.

Bharti Airtel and Reliance Jio Expected to Witness Growth in Free Cash Flow

Kolkata: Analysts predict that Bharti Airtel is likely to experience a growth in free cash flow (FCF) to around Rs 56,000 crore in FY26, while Reliance Jio is expected to see a rise to Rs 38,500 crore. This growth is attributed to decreasing capex spends and increasing average revenue per user (ARPU).

Forecasted Financials

This projection is a significant improvement from the Rs 39,360 crore FCF generated by Airtel in FY23 and Rs 14,600 crore by Jio.

Factors Driving Growth

Analysts anticipate that the sectoral monthly ARPU, a key metric for telecom companies, is estimated to reach the Rs 270-300 level in the next 3-4 years. This growth will be propelled by upcoming tariff hikes, faster 2G to 4G/5G transitions, increased postpaid user base, and enhanced data monetization due to rising data usage from nationwide 5G deployments.

Industry Analysis and Expectations

The telecom industry in India still has one of the lowest ARPUs globally, at $2.2 a month (about Rs 183). Analysts speculate that the industry’s ARPU is likely to grow at a compounded annual rate of 10-11% over the next 3-4 years, with a significant portion coming from mobile broadband upgrades, postpaid additions, and data monetization.

Market Share Predictions

It is anticipated that Airtel and Jio will continue to gain revenue market share at the expense of Vodafone Idea, as the latter faces challenges in rolling out 5G and implementing tariff hikes swiftly.

Capex Projections

JM Financial estimates a reduction in Airtel’s India business capex to around Rs 27,500 crore (FY25) and Rs 28,600 crore (FY26), whereas Jio’s capex is predicted to moderate in the coming years.

Challenges in 5G Monetization

Despite the advancements in 5G networks, analysts highlight the low 5G subscriber penetration levels and the absence of compelling 5G use-cases as hurdles for Jio and Airtel in monetizing 5G.

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