Sanjay Kapoor: Bharti and Jio to Lead Tariff Hikes, Vodafone Idea Lags in 5G

Sanjay Kapoor, the former CEO of Airtel, has stated that only Bharti Airtel or Reliance Jio can lead on tariff hikes in India's telecom market, while Vodafone Idea will struggle to compete on 5G services due to a lack of monetization. Kapoor believes that Bharti and Jio have the financial strength and market dominance to drive price increases, whereas Vodafone Idea's financial challenges will hinder its ability to invest in 5G infrastructure and services.

Reliance Jio has surpassed China Mobile to become the world's largest mobile operator in terms of data traffic consumption, registering 40.9 exabytes in Q1 2023. Jio also boasts the second-largest global 5G subscriber base at 108 million, with over 28% of its total wireless data traffic now consumed by 5G users. Analysts anticipate Jio to continue gaining market share and reach 490-500 million subscribers by FY25, driven by tariff hikes and the growth of its home broadband services, JioFiber and JioAirFiber.

However, Jio's average revenue per user (ARPU) has remained stagnant due to the influx of low-cost JioBharat phone users and ongoing promotional 5G plans. Industry experts predict that tariff increases post the general elections in June 2024 will reverse this trend, as Jio's rapid user growth and market share gains are expected to positively influence revenue conversion.

In contrast, Bharti Airtel has been consistently increasing its ARPU from ₹200 to ₹211, despite slower subscriber growth and lower data usage compared to Jio. Airtel's emphasis on higher-paying customers and premium services has helped drive revenue growth.

Why this matters: The statements from Sanjay Kapoor and the contrasting performance of Jio and Airtel highlight the intensifying competition and diverging strategies in India's telecom market. The ability to monetize 5G services and drive tariff hikes will be crucial for operators to sustain profitability and invest in network expansion, shaping the future of India's digital landscape.

Nuvama, a brokerage firm, has picked Bharti Airtel and Vodafone Idea as prominent telecom stocks, maintaining a 'buy' rating on Airtel with a target price of Rs 1,580, up from Rs 1,305. For Vodafone Idea, Nuvama has upgraded the rating to 'buy' and doubled the target price to Rs 14 from Rs 7. The brokerage expects a 10% tariff increase in Q2FY25 and another 10% rise in Q3FY26, along with a capital investment of Rs 40,000 crore in Vodafone Idea over the next 8 quarters. "An increase in tariffs and government support can lead to strong growth in the telecom sector over the next 3 years," Nuvama stated.

Key Takeaways

• Bharti Airtel and Reliance Jio can lead on tariff hikes, Vodafone Idea struggles.
• Jio surpassed China Mobile as world's largest mobile operator by data traffic.
• Jio aims for 490-500M subscribers by FY25 via tariff hikes and broadband growth.
• Airtel increased ARPU from ₹200 to ₹211 despite slower subscriber growth.
• Nuvama expects 10% tariff hikes in Q2FY25 and Q3FY26, boosts Vodafone Idea rating.