“We expect 2023 revenue and EBITDA of Bharti and Reliance Jio Infocomm Ltd to grow by the low- to mid-teens, driven by subscriber additions and a 7%-10% increase in monthly average revenue per user (ARPU),” analysts from Fitch said.
The firm also foresees tariff hikes by Indian telcos in 2023.
“We expect telcos to raise headline tariffs in 2023, given the focus on profitability amid industry consolidation. Vodafone Idea, the third-largest telco, needs to increase tariffs as its EBITDA generation is insufficient to meet finance costs and to invest sufficiently in capex,” it said.
Indian telcos continue to have one of the lowest monthly ARPUs ($2.5) and the highest average monthly data usage (20 GB) in the world.
The average net debt/EBITDA is expected to improve to about 2 times on the back of strong EBITDA growth while free cash flow generation is likely to remain light, thanks to high 5G capex investments (including spectrum) amounting to 30%-35% of revenue.
Bharti Airtel is expected to invest about $3 billion-4 billion for rolling out a non-standalone 5G network in the next three years, while Jio is likely to invest $13 billion-14 billion to roll out a standalone 5G network in the next three years, Fitch said.
The report added that divergence in 5G network strategy between Bharti and Jio may affect the market-share dynamics in the medium- to long-term. “We believe that the 5G business case could be limited in the short term as most of the current applications are comfortably served by 4G, and penetration of 5G handsets in India is less than 5%,” it added.
Reliance Jio and Bharti are expected to continue to consolidate market share as they will garner 80%-85% of the revenue of private telcos during 2023-2024. It stressed that while Airtel will retain its 35% active subscriber market share, Vodafone Idea will continue to lose market share – given its extremely weak financial position.