The telecom industry is expected to take a 15-17 per cent tariff hike post general elections, according to an analyst report that termed the tariff increase in the sector as "imminent" with Airtel as the biggest beneficiary.

The general election in the world's largest democracy is scheduled to be held in seven phases between April 19 and June 1, and results will be declared on June 4.

"We expect the industry to take a 15-17 per cent tariff hike post the elections," a report by Antique Stock Broking said, as it described the tariff hike as imminent and Bharti as the biggest beneficiary.

The last hike of about 20 per cent was in December 2021, it said.

Offering a break-up of ARPU (Average Revenue Per User) for India's second largest telco, the brokerage note said Bharti's industry-leading current ARPU of Rs 208 is set to go up to Rs 286 by end of FY27.

This will be driven by a tariff hike contributing Rs 55, upgradation of 2G customers to 4G contributing Rs 10, and customer upgradation to a higher data plan (both 4G and 5G) and moving to postpaid delivering Rs 14 gain.

"We expect Bharti's subscriber base to grow at about two per cent per annum, against the industry growth of one per cent per annum," it said.

The brokerage expects Sunil Mittal-led Airtel to ride its best financial performance phase in over a decade driven by tariff hike, 2G upgradation, strong growth of enterprise and Fibre-to-the-Home, and a fall in capex post the 5G rollout, over the next three years.

"While challenges do exist as Bharti has chosen a different 5G rollout path versus key competitors, we believe it is unlikely to dent Bharti's subscriber base or growth significantly. We also believe valuations do not reflect the emerging highly positive macro telecom sector environment," it noted.

Bharti has guided for a capex of about Rs 75,000 crore over FY24-“26, including the 5G rollout, it said, adding that post the rollout, the capex intensity is likely to fall significantly.

"We estimate a capex of about Rs 75,000 crore over five years starting FY27, a significant drop from about Rs 19,000-“20,000 crore per annum current run-rate for the wireless business, while the total India capex including wireless, DTH, FTTH/ FWA, and Enterprise is likely to decline from the current Rs 26,500 crore per annum run rate (FY24'“26) to Rs 23,000 crore per annum (ex-spectrum/ AGR payment)," it said.

The decline is "stark" as a percentage of revenue (down to 12 per cent from the current 21 per cent), given the long-term revenue growth of 10 per cent CAGR (compounded annual growth rate) primarily driven by ARPU growth that has been assumed.

The top two telecom players in India have been gaining subscriber market share over the last almost 5.5 years, at the expense of Vodafone Idea and state-owned BSNL --” the former due to its financial woes and the latter its execution troubles.

"While Vodafone Idea is down from 37.2 per cent in September 2018 to almost half at 19.3 per cent in December 2023, Bharti's market share is up from 29.4 per cent to 33 per cent during this period. Jio is the biggest gainer rising from 21.6 per cent to 39.7 per cent," it said.

Revenue market share changes are directionally similar, although the swing is lower on account of varying price changes and the 2G versus 4G mix.

"VIL was down from 35.3 per cent in 4QFY18 to 19.3 per cent in 4QFY23, while Jio was up from 24.4 per cent to 44.5 per cent and Bharti was up from 28.7 per cent to 35.8 per cent," the note by Antique Stock Broking said, outlining that while there has been some consolidation so far, yet there is no let-up in the competitive intensity.

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