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Airtel dials it in

Airtel dials it in

solid quarterly results and a tariff hike provide positive signals for the industry
November 25, 2021
3 min read
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solid quarterly results and a tariff hike provide positive signals for the industry

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the Indian telecom market is a bit of a cat and mouse game. Reliance Jio’s entry into the arena made it one. Jio’s low rates and generous data plans made it impossible for others to charge any higher, as they would simply risk losing their customers to it. the industry was bleeding, with regulatory bodies and competitors alike calling out that it wasn’t sustainable. it became a game of patience for Airtel, previously the dominant force in the market, to bide its time until Jio either ran out of runway or into other issues. with Jio losing a whopping 19 million customers in September, it appears that time is finally here.

Airtel has pulled the trigger on price hikes in the region of 25% for its prepaid plans, effective November 26. in response, its stock price has jumped 6.2% in two days, from Rs 714/share at the start of trading on November 22 to Rs 759/share at close on November 23.

solid foundation

the move comes just a couple of weeks after Airtel turned in an excellent report card for Q2 FY22. its Profit After Tax (PAT) came in at Rs 1,134 crore against a loss of Rs 763 crore in the corresponding quarter last year, also jumping 300% from the Rs 284 crore reported in Q1 FY22. its revenue from India mobile services grew 20.3% year-on-year thanks to an increase in 4G customer base and the ARPU (average revenue per user) which came in at Rs 153 compared to Rs 143 last year.

the price hike is expected to further push the ARPU to around Rs 185, with Airtel seeking to gradually raise it to the Rs 300 mark. that could be one of the factors influencing Moody’s decision to upgrade Airtel’s rating from stable to positive.

moving in a pack

with the last industry-wide tariff hike coming in December 2019, many operators were itching to make the move but hesitant to be the first. soon after Airtel, Vi (Vodafone Idea) announced tariff hikes of its own. its stock price had already risen 8% in anticipation on the back of Airtel’s move. it wasn’t the only one as Tata Teleservices hit the upper circuit and MTNL surged around 5% on the day that the news broke.

the telecom bailout package of September, which deferred AGR dues and spectrum payments, had already put the telecom industry in an optimistic mood. a co-ordinated tariff hike could act as a springboard for them to start improving their bottom lines and build sustainably. that could be good news for stocks in the sector, whose sectoral index is already pursuing new lifetime highs.