Telecom companies like Bharti Airtel and Vodafone Idea can increase their service prices by another 15% in the financial year 2027, according to analysts at JPMorgan. They believe this is possible because mobile services in India are still affordable compared to other Asian countries, and the regulatory environment is favorable.
The Supreme Court’s recent decision on Adjusted Gross Revenue (AGR) requires Vodafone Idea to raise prices to manage its spectrum and AGR payments. JPMorgan notes that Indian data costs are the lowest in the region at $0.09 per GB, and the average revenue per user (ARPU) as a percentage of GDP is just 0.7%, which is low nearly ten years after Jio’s launch.
JPMorgan expects these price increases will help telecom companies recover financially. For the second quarter ending September 2024, they anticipate some subscriber losses for Bharti Airtel and Vodafone Idea, but ARPU should benefit from recent price hikes.
Key Updates:
- Bharti Airtel: JPMorgan rates it as their top choice in telecom. They expect a 15% price hike in FY27, which could increase revenues and margins. The target share price for Airtel has been raised to ₹1,920 from ₹1,670.
- Bharti Hexacom: The target price for Bharti Hexacom shares has increased to ₹1,580 from ₹1,330.
- Indus Towers: Indus Towers is considered the top pick among telecom and tower companies. The target price for Indus Towers has risen to ₹525 from ₹500.
- Vodafone Idea: The rating for Vodafone Idea has improved from Underweight to Neutral, with a target price increased to ₹10 per share from ₹7.
Expected Q2 Results:
- Bharti Airtel is predicted to show a 6.7% quarter-on-quarter revenue growth, driven by a 9% rise in ARPU, despite losing 1.2 million subscribers.
- Bharti Hexacom is expected to see a 6.1% revenue growth with a 7% rise in ARPU and a slight decline of 0.2 million subscribers.
- Vodafone Idea is estimated to report a 5.7% revenue growth, supported by an 8% ARPU increase, although it’s expected to lose 4 million subscribers.
- Indus Towers is projected to see a 4% revenue growth due to new tower installations.
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