India's telecom industry is poised for another round of tariff increases, with a 12-15% hike expected over the next three to four months, according to a Centrum Institutional Research report. The brokerage attributes this to a more favorable pricing environment following market consolidation, which has reduced the number of major private players to three plus one state-owned operator.
Pricing Environment Favors Hike
The report, a Q1FY27 telecom and internet sector preview, states: "The pricing environment has become more favourable with only 3+1 players and we expect another 12-15% tariff hike over the next 3 to 4 months." This follows previous increases and reflects the reduced competitive pressure in the market.
ARPU Growth Expected in Q1
The brokerage forecasts a 1-1.5% quarter-on-quarter increase in Average Revenue Per User (ARPU) for the three private operators in the June quarter. This growth is driven by subscriber migration from 2G to 4G and 5G networks, postpaid customer additions, and a higher number of days in the quarter. Centrum notes that Bharti Airtel and Reliance Jio are expected to continue gaining subscriber market share at the expense of Vodafone Idea (VIL).
Subscriber Market Share Shifts
Specifically, Reliance Jio is projected to add 7 million subscribers quarter-on-quarter, while Bharti Airtel is expected to add 5 million. In contrast, Vodafone Idea is forecast to add only 0.2 million customers QoQ. This trend underscores the ongoing consolidation and the challenges faced by VIL in retaining its customer base.
Data Usage and 5G Expansion
Data usage per customer is expected to remain robust, driven by increasing 4G and 5G penetration. The report highlights that Reliance Jio and Airtel have covered over 90% of districts with 5G services and are focusing on adding more 5G devices to their networks. Both companies are also seeing strong traction in 5G fixed wireless access (FWA) and fixed broadband additions, as penetration in these segments remains low.
Vodafone Idea is also expanding its 5G footprint, with its network now present in around 100 cities. The company is ramping up coverage, though it lags behind its rivals. Additionally, the report notes that VIL's adjusted gross revenue (AGR) dues have significantly reduced, with the present value of future AGR payment obligations now at Rs 25,000 crore.
Industry Outlook
The anticipated tariff hike is expected to further boost ARPU and revenue for the sector, though it may also impact subscriber growth for some players. The focus on 5G and data services continues to drive competition, with Jio and Airtel leading the way. Vodafone Idea's ability to stabilize its subscriber base and expand its 5G network will be critical for its future performance.
