NEW DELHI, May 31: India’s 5G subscriber count is seen rising several notches to 20-25 per cent of the overall base in one year, but though telcos are in a ”better position” to execute tariff increase, actual visibility on a ”meaningful” increase remains uncertain, Ind-Ra said.
According to India Ratings and Research (Ind-Ra), this is because globally too 5G has not yielded any major tariff premium over 4G rates.
The use cases of 5G in India are still limited to applications such as video streaming and multi-person video calls.
The Fitch Group company, in its telecom outlook FY25 has maintained a neutral outlook on the sector for the current fiscal. It expects the subscriber base to reach 20-25 per cent over the next one year from about 17 per cent currently, in line with global experience.
Average Revenue Per User (ARPU), it said, may continue to exhibit organic growth albeit the growth rates, per se, have tapered somewhat. Ind-Ra believes Reliance Jio and Bharti Airtel have an opportunity to capture a higher proportion of premium subscribers of Vodafone Idea, who are keen to experience 5G. Accordingly, it has predicted another round of market share shifts.
The agency said the current fiscal would be an inflection year for telecom companies in terms of investments peaking out (5G capex, spectrum renewal) and the tariff environment remaining subdued.
According to its assessment, the investments have likely reached their peak in FY24, given that the execution of industry-wide 5G capex of around USD20 billion was almost in the last leg by end-FY24.
From here on, the investments will whittle down from their peak highs although spends will continue given the ensuing spectrum auctions (scheduled to begin next week) and ongoing re-fiberisation initiatives.
”Visibility on meaningful tariff hikes remains uncertain, since globally also 5G has not yielded any major tariff premium over 4G tariffs,” Priyanka Bansal, Associate Director of Ind-Ra said.
That said, currently, telcos are in a much better position to execute tariff hikes, given the improvement in service offerings (higher data quantum, higher speed, other auxiliary offerings, 5G speed etc) since the last tariff hikes seen in late 2021.
Overall, Ind-Ra expects the margin structure of telcos to improve in FY25, owing to revenue growth supported by operating leverage.
However, return ratios (ROCE) and free cash flow will see a sharp improvement only in FY26, when capex subsidies and potential tariff hikes help improve revenues, it said.
The growth rate of APRU, in the last few quarters, has been organic, but those growth rates too have moderated from the previous levels.
”Reliance Jio Infocomm and Bharti Airtel may continue to acquire market share from Vodafone Idea Limited (VIL), especially in the high-ARPU (average revenue per user) customer base,” it said.
The outlook for telecom equipment manufacturers is neutral for FY25, given the strong demand drivers (domestic and exports) and supportive regulatory environment (Production-linked Incentives). (PTI)
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