The 15-20 percent increase in mobile tariffs for both prepaid and postpaid plans by telecom service providers (TSPs) in India including Bharti Airtel and Reliance Jio is set to generate an additional Rs 20,000 crore in operating profits for the industry, according to industry experts.
Bharti Airtel and Reliance Jio are expected to see significant gains in average revenue per user (ARPU) following the tariff hike. Vodafone Idea, however, has yet to implement similar increases.
“This will lead to higher profit generation, providing the industry with the capacity to reduce debt and fund technological upgrades and network expansion,” said Ankit Jain, Vice President and Sector Head of Corporate Ratings at ICRA.
ICRA projects industry revenues to grow by 12-14 percent in FY25, translating to an operating profit expansion of 14-16 percent due to operating leverage. The telecom industry is expected to report revenues of Rs 3.2-3.3 lakh crore, with operating profits reaching Rs 1.6-1.7 lakh crore in FY25.
“The rise in operating profits, combined with minimal participation in recent spectrum auctions and expected moderation in capital expenditure, is likely to reduce debt levels to around Rs 6.2-6.3 lakh crore by March 31, 2025, with further declines anticipated,” ICRA added.
A note from Morgan Stanley estimates that blended ARPU would benefit in the range of 16-18 percent for Bharti Airtel and Reliance Jio.