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Latest tariff hikes to increase Reliance Jio, Bharti Airtel, Vodafone Idea’s ARPU by 15%: CareEdge

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In Short:

The recent tariff hikes by Reliance Jio, Bharti Airtel, and Vodafone Idea could increase their average revenue per user by 15% to Rs 220 by 2025. This could also boost their profit by 20-22%. The telecom industry’s debt levels are expected to decrease with the expansion of profits. Airtel and Vi have emphasized the importance of increased ARPU for the sustainability of the telecom sector. Jio and Airtel are offering free 5G services to attract and retain customers.

Telecom Tariff Hikes to Boost ARPU for Reliance Jio, Airtel, and Vodafone Idea: CareEdge

The latest round of tariff hikes by Reliance Jio, Bharti Airtel, and Vodafone Idea is projected to increase their blended average revenue per user (ARPU) by 15% to Rs 220 in FY 2025, compared to Rs 191 in the fiscal year, as per CareEdge. This could potentially boost the telcos’ profit before interest, lease depreciation, and tax (PBILDT) by 20% to 22% in the same year.

Impact on Industry

According to a research note by the credit rating agency, the increase in ARPU is a positive development for an industry that has been heavily investing in 5G rollout and spectrum purchases, affecting their Return on Capital Employed (ROCE).

Every Rs 1 rise in ARPU could potentially add close to Rs 1,000 crore to the industry’s PBILDT. With the anticipated growth in blended ARPU, CareEdge expects the telcos to deleverage their capital and strengthen their networks, technology, and overall infrastructure.

Associate Director of CareEdge Ratings, Prasanna Krishnan, mentioned that debt levels are expected to moderate in FY 2025, with a decline forecasted due to lower capex intensity and reduced participation in recent spectrum auctions, leading to an improvement in leverage ratio.

Tariff Hikes Implementation

The major telecom companies have announced a nearly 20% increase in their prepaid and postpaid plans, with the revised tariffs set to take effect from early July.

Jio and Airtel are emphasizing the need to enhance returns following substantial investments in 5G spectrum, while Vi aims to strengthen competitiveness and stabilize its financials after a recent equity fundraising initiative.

Future Plans

Jio and Airtel are gearing up to launch commercial 5G services and have already introduced 5G fixed wireless access (FWA) in key cities to capitalize on their latest network technologies. Vi, on the other hand, plans to invest significantly in enhancing 4G services and preparing for 5G deployment.

Following the tariff adjustments, both Jio and Airtel will offer unlimited 5G on select plans, with Airtel leading in ARPU at Rs 209, followed by Jio at Rs 181.7 and Vi at Rs 146.

The analysis indicates that Jio’s prepaid plans remain comparatively more affordable by up to 20% than those of Airtel and Vi, raising questions about subscriber migration and competitive dynamics in the telecom sector.

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