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Telcos likely to see modest revenue growth in June Qtr

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The telecom sector is likely to see a modest 2.5-3% sequential rise in revenue growth in the June quarter despite higher data usage during the recent IPL cricket tournament as well as stronger demand for international roaming packs in the summer when many venture on holidays overseas, said analysts.The slight uptick is mainly because mobile users who opted for 5G packs are still paying lower 4G rates, and the overall volume of subscribers upgrading to higher-priced plans will be modest as most have large amounts of unused data, the analysts said.

Further, some of the digital viewing of IPL cricket action on smartphones was through WiFi and not mobile data, which is also likely to limit sequential revenue growth for the top private carriers.

“Data usage (for the telcos) is estimated to have risen 5-6% sequentially on a month-on-month basis during the recent IPL cricket event, but that is unlikely to trigger beyond 2% sequential growth in telecom sector revenue in the June quarter as consumers, typically, have a lot of unused data which reduces their need to upgrade to costlier mobile broadband plans,” Prashant Singhal, emerging markets (technology, media & telecom leader), EY India, told ET.

Telcos Likely to See Modest Revenue Growth in June Qtr

He, though, expects a pick-up in overseas travel during the May/June summer holiday season to drive demand for international roaming packs. This would potentially generate an additional 0.5-1% sequential revenue growth for operators, resulting in an overall 2.5-to-3% sequential growth in June quarter telecom sector revenue, he added.

ET’s queries to Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) remained unanswered.

Singhal said significant revenue growth drivers for India’s top telcos would be the next round of tariff hikes or changes in tariff structure, coupled with stronger conversions of 2G users to 4G or 5G services.

According to analysts, continuing availability of unlimited 5G plans from Jio and Airtel have also curbed average revenue per user (APRU) growth, but they expect India’s top two telcos to focus on 5G business monetisation in FY25 to boost returns on their massive 5G-related investments.

Sanford C. Bernstein expects India’s telcos to go for an initial 20% tariff hike this fiscal and a follow-up 15% hike in FY26 to shore up ARPU levels. BofA Securities, in turn, said as per a recent online customer survey, only 36% of Jio and Airtel users were ready to take a potential 20-25% tariff hike in their stride, post-elections.

The telecom sector last raised tariffs in November 2021 by 20-25%. According to analysts, if headline rates are raised by July, the beneficial impact on telcos revenue would kick in by the second and third quarters of FY25, depending on the magnitude of the hikes.

To be sure, analysts estimate a 5-6% sequential jump in data usage (month-on-month) after IPL since digital viewership levels are likely to have been uniform throughout the tournament.

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