Airtel’s prepaid tariff hike was a must for telecom sector: CRISIL
Crisil Ratings on Monday said the hike in prepaid tariffs by telecom operator Bharti Airtel was a “much-needed step towards correcting the profitability and return profile” of the telecom sector.
Airtel will increase the prepaid tariff by around 20 per cent, which will be effective from November 26. According to the rating agency, this revision in tariff will enable telcos to invest in 5G mobile services in the medium term.
“Telecom is a capital-intensive sector, as it requires continuous technological up-gradation. Major players had already invested Rs 5 lakh crore to roll out 4G services between the financial years 2017 and 2021. Telecom to At least Rs 70,000 crore will need to be invested on 5G spectrum. The auction is likely to take place in the next financial year if the bidding is prudent,” the rating agency said.
The rating agency claims that Indian telecom operators have the lowest ‘average revenue per user’ (ARPU) per month in the world and low return on capital investment, despite having the second highest average data traffic per user.
Assuming that other telcos follow suit on tariff hike along with rising data consumption, the current hike should increase the sector’s ARPU by 15-20 per cent to Rs 155-160 in the next fiscal from Rs 155-160 in the previous fiscal. 135 in the year, and the return on capital was Rs 7. percent, it added.
“Given the sector’s high operating leverage, the current tariff hike will push the sector’s EBITDA by 40 per cent to over Rs 1 lakh crore in FY2023 as compared to FY21. The last hike in industry-wide tariffs in December 2019 In FY21, the sector’s ARPU increased by 15 per cent and EBITDA by 35 per cent to Rs 72,000 crore.
Read more: Airtel announces 20-25 per cent hike in tariff for prepaid offerings
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