Tariff Hike, 4G Adoption, And Data Consumption Might Boost ARPU: Crisil

The Supreme Court decision on AGR dues has eroded the advantage of the tariff hike as the revenue of the telcos has dropped. Notably, the tariff hikes were expected to increase the revenues but liabilities of adjusted gross revenue have affected return on capital employed (ROCE).

"Had the AGR liability not panned out as it did, the tariff hikes undertaken in December 2019 could have improved the industry's RoCE to 7 percent in fiscal 2021 and to 9 percent in fiscal 2022, from lows of 3 percent in fiscal 2020," rating firm CRISIL said.

The report said that telecom companies need to increase their average revenue per user to 25 percent to Rs. 175 to Rs. 180 in the six and 12 months. The rating agency also highlighted that tariffs hikes, increasing 4G adoption, and data consumption might increase the ARPU of the telecom operators.

"Tariff hikes, rising 4G adoption, and increasing data consumption by adopting content-led bundled pricing strategies could help boost ARPU growth. That could, in turn, beam up profitability, which will also help telcos invest in 5G networks over the medium term," Crisil added.

Moreover, the analysts at Crisil said the addition of Rs. 1 in the ARPU of the telecom operators might increase the Ebitda by Rs. 1,000 crore. It said that if ARPU increased by 25 percent, then Ebitda will increase to Rs. 79,000 crore in the financial year by 2022 against Rs. 38,500 crore during this financial year.

The report highlighted that Capex is likely to between Rs. 62,000 to Rs. 65,000 during this financial year as compared to the last fiscal 2020 of Rs. 83,000 crore. The report added that the telecom companies might not invest in the 5G mobile services in the next year.