Indian telecom operators Reliance Jio, Bharti Airtel, and Vodafone Idea are anticipated to implement a 10% tariff hike later this year, marking the second increase within a year. The last tariff hike of up to 25% was introduced in July 2024 after a two-year gap. Analysts suggest the move is driven by the operators’ focus on monetization and the potential introduction of 5G-specific pricing.
Drivers Behind the Tariff Hike
“Jio’s potential IPO in 2025 is likely to make it more open to higher tariffs to drive growth. Bharti Airtel seeks tariff hikes to improve its return on capital employed (ROCE),” said Akshat Agarwal and Ayush Bansal, analysts at Jefferies. For Vodafone Idea (Vi), with the government as the largest stakeholder, a tariff hike could be an essential step in its recovery efforts.
Impact on ARPU and Revenue Growth
The proposed tariff hike is expected to boost the sector’s average revenue per user (ARPU) by at least 25%. Analysts at Jefferies predict that this will lead to a 15% year-on-year revenue growth for the telecom industry, with margins expanding by 170-200 basis points for Airtel and Jio. A combination of revenue growth and moderating capital expenditure is expected to enhance free cash flow generation, positioning 2025 as a year of growth for telecom operators.
Operator-Specific Trends
- Jio: The company is under pressure to increase mobile tariffs to improve ROCE, which remains under strain due to its high capital expenditure. Although Jio’s subscriber base has grown, its revenue market share gains have been slower, partially due to subscriber losses (11 million in Q2FY25) from SIM consolidation.
- Airtel: While Airtel has been gaining rural market share, analysts foresee a slowdown as most of its rural network rollouts are complete.
- Vodafone Idea: Vi is expected to benefit from improved market share as it deploys networks following its recent capital infusion.
Earnings Outlook
Reliance Jio’s parent company, Reliance Industries, is set to announce its Q3FY25 earnings on January 16. Key focus areas include Jio’s subscriber growth, ARPU performance, and commentary on the impact of previous tariff hikes. Analysts project a sequential ARPU increase of 3-5% for telecom operators, leading to an average revenue growth of 4.3% quarter-on-quarter. Bharti Airtel is expected to lead this growth trajectory.
The tariff hikes, coupled with expanding networks and the rollout of 5G services, are poised to set the stage for sustained growth in the telecom sector.
