I remain positive on the Telecom sector as 2G to 4G migration, increased data monetization and expected tariff hikes would support ARPU growth for telecom service providers in near term. Tariff hike of around 15-20% is expected in near future as telecom companies try to achieve more sustainable level of ARPU. Bharti Airtel remains on strong footing with industry leading ARPU, growing subscriber base and excellent track record in business execution and is expected to deliver superior result going ahead. The financial condition of VIL remains precarious as it continues to lose subscribers and has the lowest ARPU in the industry (implying weak customer mix) and we expect it to underperform. It urgently needs massive capital infusion to augment its capex to catch up with peers in terms of network quality. Reliance Jio is expected to maintain the steady growth trend in subscribers and ARPU, through the increase in subscribers might moderate going ahead. However, at the sector level, there is overhang of 5G related capex for telecom service providers and it might adversely impact their free cash flow generation. Also, the telecom operators would have to come up with newer ways to monetize their investment in 5G technology. In terms regulatory provisions, we expect the draft Telecom bill, that consolidates three separate acts governing the telecom sector — Indian Telegraph Act 1885, Indian Wireless Telegraphy Act 1933, and The Telegraph Wires, (Unlawful Protection) Act 1950 to be passed by the Parliament in 2023.
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