Kolkata: Telecom sector revenue<\/a> is set to increase 3-4% quarter-on-quarter in the October-December period, on the back of decent 4G<\/a> additions and rising data usage<\/a> in the seasonally stronger third quarter of the financial year, according to analysts.
Revenue could increase more than 5% sequentially in the fourth quarter, they said, if Bharti Airtel<\/a> extends its recent sharp increase in base rates in Odisha and Haryana to other circles, and if Reliance Jio<\/a> and Vodafone Idea<\/a> (Vi) take a cue from the Sunil Mittal-led telco.
“Recent changes in tariffs at the lower end (by Bharti Airtel<\/a>) are unlikely to have any meaningful impact on telecom industry<\/a> revenue growth in the third quarter of 2022-23, but if they are extended to other circles and competition follows, it can boost revenue in the fourth quarter of 2022-23,” Kunal Vora, head of India equity research at BNP Paribas<\/a>, told ET
Earlier this month, Bharti Airtel increased its base tariff by a whopping 57% to Rs 155 in Odisha and Haryana to test the waters, raising the possibility of another round of industry-wide rate revision almost a year after the last one.
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Another analyst with a global brokerage, who did not wish to be identified, said the actual quantum of sectoral revenue growth in the January-March quarter, 2023, would hinge on the extent of tariff hikes that Jio and Vi take in response to Bharti Airtel’s move.
“It depends on how soon Airtel extends its base pack tariff hikes to other circles, and also if Jio and Vi raise their minimum recharge plans initially from Rs 99 to the Rs 125 level or directly match Airtel and raise it to Rs 155,” said the second analyst.
Sanjesh Jain, research analyst at ICICI Securities<\/a>, said if competition follows suit, the industry<\/a> will have established massive pricing power – or a seller’s market where telcos dictate pricing terms - which has not been seen in more than a decade. When companies have pricing power, demand doesn’t drop even if they raise prices as there are fewer alternative products or services to choose from.
“Bharti is clearly ready to walk the talk on tariff hikes, and if competition responds, this should position India telecoms very differently than global telco peers who have slow-growing revenue and depressed and falling RoIC (returns on invested capital),” said Jain.
At Bharti Airtel’s second quarter earnings call this month, managing director Gopal Vittal underlined the need for another round of tariff correction as the current 8.5% return on capital is very low.
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