Motilal Oswal also stated that Airtel Xstream Fiber connections and its services are "gaining ground" with its telecom tariff plans.
Bharti Airtel, India's second largest wireless operator, is expected to raise tariffs soon, Motilal Oswal said in a report. The company said the tariff plans hike "that seemed uncertain" over the past six to nine months "began to look imminent" due to "weakening subscriber growth in the industry."
However, Motilal Oswal noted that Airtel's earnings forecasts "remain strong" due to the "constant additions of 4G subscribers". The steady growth in 4G subscribers is said to translate into a 2% to 3% quarterly (QoQ) growth in average revenue per user (ARPU) for Airtel.
Motilal Oswal expects rate hike from 15% to 20%
Telecommunications subscription data for the period ending September 30, 2020, released by the Telecommunications Regulatory Authority of India (Trai), shows that Airtel gained over 3.7 million users in September.
India's second largest wireless operator has gained 10 million users in the past three months after posting a cumulative loss of 12.4 million users during the lockdown. Airtel is now rumored to have 316 million active users as of September 30, 2020, while Reliance Jio leads with 318 million active users.
Motilal Oswal said recent increases in Vodafone Idea's postpaid plans "create a positive environment" for the industry.
"Our recent interactions with industry experts indicate a potential 15-20% price increase over the next two months," said Motilal Oswal in his report.
The company said Vodafone Idea "could take the initiative" to further increase its rates due to multiple factors such as "low membership growth, weak liquidity position and fundraising requirement".
"Bharti [Airtel] has indicated that he can follow the fare increases of its peers," Motilal Oswal said in his report. "RJio can follow its peers while keeping the discount intact."
Basically, the company pointed out that Reliance Jio "can refrain" from taking a first step to raise rates. Motilal Oswal said India's largest wireless operator has seen a large number of users stop using its services after the latest rate hikes in December 2019.
Motilal Oswal says Xstream fiber services are gaining ground
Meanwhile, the company noted that the partnership between Airtel and local cable operators (LCOs) is "gaining ground" and that Airtel is expected to see an increase in Xstream Fiber's user base in the coming quarters. Airtel, in its second quarter report for the period ending 30 September 2020, highlighted that the LCO model was active in 48 cities in India.
Motilal Oswal said Airtel initially "narrowed its target to reaching the top 100 cities" with its Xstream fiber services due to "high investment and low commercial profitability".
"However, the low investment required in the LCO model allows it to expand to other cities," Motilal Oswal said in his report. “This has taken its target market to 150 cities. RJio has a giant goal of reaching 1,600 cities. However, its current subscriber base of just ~ 1 million explains that its target is limited to major cities. "
