Significant headroom for ARPUs to rise: Airtel asserts at analyst meet

Telecom operator Bharti Airtel's management has affirmed ambitions of Rs 300 ARPU with further tariff hikes and continued 'premiumisation' during a recent analyst meet, according to multiple reports

Telecom operator Bharti Airtel's management has affirmed ambitions of Rs 300 ARPU with further tariff hikes and continued 'premiumisation' during a recent analyst meet, according to multiple brokerage reports.
 

Credit Suisse, in a note on Bharti Airtel, said that while the 5G auctions are likely in the first quarter (Q1) of FY23, the telco "expects a more gradual roll out given limited handset readiness".
 

However, it is ready for accelerated rollout, if competition demands, Credit Suisse report said.
 

"We attended Airtel's analyst meet on January 25, 2022 where the management presented Airtel's integrated telecom and digital offerings. It reiterated ambitions of Rs 300 ARPU with further tariff hikes and continued premiumisation," it said.

In telecom parlance, ARPU (short for average revenue per user) means realisation per subscriber and is an important monitorable metric for telecom players.
 

Bharti has highlighted that there is a significant scope for ARPUs to rise as mobile tariffs are low and prepaid to postpaid migration and featurephone to smartphone migration offer further scope for ARPUs to rise, according to Jefferies' report.
 

JP Morgan, in its note throwing light on Bharti's investor and analyst meet went on to say that the company has "reiterated its expectation of 2-3 more tariff increases over the next few years – that can improve ROCE disproportionately".
 

Bharti sees significant ARPU inflation opportunity, it pointed out.
 

On similar lines, Kotak Institutional Equities observed that Bharti envisages a significant opportunity to drive an increase in ARPU in the coming years underpinned by an increase in tariffs, about 200 million feature phone upgrades likely by FY2025 and sustained premiumisation across its customer base.
 

On capex and capital allocation, many brokerage reports underlined that Bharti's ahead-of-time network investments will lead to flattish capex over 3-4 years, even with the 5G roll-out.
 

Jefferies said that Bharti indicated limited change in its capex profile even when 5G networks are rolled out, as these rollouts will happen where 4G investments are complete. "Full-scale 5G rollouts are more likely to be from FY24," it wrote.
 

Edelweiss observed that Bharti Airtel has conducted extensive 5G trials, built the core and strengthened the transport layer to prepare for fifth generation rollout.
 

"Management underscored its principled approach, wherein it will roll-out 5G only on sites with high 5G handset penetration and increasing 4G congestion. This will lead to steady capex over the next 3-4 years, even with the 5G rollout," Edelweiss said.
 

The Indian market is gearing-up for roll out of 5G services, that will usher in ultra high-speeds and spawn new-age services and business models.
 

Telecom regulator's recommendations on spectrum pricing and other modalities are expected soon. The spectrum auctions are slated to be conducted in 2022, to facilitate the roll out of 5G mobile services within 2022-23, by private telecom providers.
 

Telecom service providers are conducting 5G trials in Delhi, Mumbai, Jamnagar, Ahmedabad, Kolkata, Chennai, Hyderabad, Bengaluru, Lucknow, Gurgaon, Gandhinagar, Chandigarh, Pune and Varanasi including urban, semi-urban and rural areas.

Airtel has said it is fully prepared for 5G in emerging digital world and is building a robust pipeline of innovative use cases for India.