According to analysts at Jefferies, mobile costs could increase soon as telecoms are anticipated to raise prices by as much as 10%. According to the brokerage’s most recent analysis, 10% pricing increases from Bharti Airtel and Reliance Jio are anticipated to be announced in the fourth quarters of FY23, FY24, and FY25.
The telcos have already reaped the most of the rewards of the most recent tariff increase, and pressure is mounting on their revenue and margins. Analysts claim that this requires telcos to raise their rates. A crucial indicator of a telecom company’s profitability, average revenue per user (ARPU), was moderately up for the September quarter at Airtel, Vodafone Idea, and Jio.
Jio’s ARPU climbed 0.8% sequentially whereas Vodafone Idea’s ARPU increased by 1%. In contrast, Airtel reported a 4% increase as a result of premiumization. Airtel removed the 99-pack in a few circles earlier this year to test the rate rise waters. The tariff increase strategy, according to analysts at Jefferies, is ideal for the telco’s intentions to expand into rural areas, which would likely further reduce profits. Airtel’s EBITDA margin decreased from 43.7% in Q1 to 36.9% in Q2.
The companyu2019s CEO Gopal Vittal had earlier in November said over 40% of industry 4G net additions were coming from rural areas and he believed u201cthe time is right to bridge a substantial part of the coverage gap in mobile against the leading player in the industry.u201d Keeping these factors in mind, analysts at Jefferies have maintained their tariff hike outlook.
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Subscriber churn rises as subscribers shop for better plans
Additionally, analysts at Jefferies claimed that rising subscriber attrition and requests for mobile number portability (MNP) indicated escalating competition in the Indian telecom industry. The rate at which customers discontinue paying the company for services is referred to as subscriber churn. The margins are negatively impacted as a result.
u201cThe rise in MNP requests over the past five months implies increasing competition for subscribers in the market. This is also evident from the higher churn levels seen during Q2 FY23 across telcos,u201d said the Jefferies report. Jio and Airtel combined attracted 2.2 million new users, according to Telecom Regulatory Authority of India (TRAI) subscriber data for October 2022. However, Vodafone Idea’s troubles persisted as its subscriber base shrank by 3.5 million.
While the total number of active subscribers remained unchanged at 1.01 billion, the number of MNP requests increased in October to 11.81 million, nearly matching September’s 11.97 million, which is the highest in 2022. Telcos Airtel and Vodafone Idea reported higher subscriber turnover in their Q2 FY23 earnings, while Jio had lower subscriber attrition.
Vodafone Idea reported a substantially higher churn rate at 4.3%, compared to Airtel’s Q2 FY23 subscriber attrition of 3.3%. Jio, however, recorded a churn rate of just 2%. Overall, customer turnover in the telecom sector rose from 2.7% in Q1 to 3% in Q2 FY23.
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