Telecom Sector Fundamentals Improved In March Quarter: India Ratings
Traffic passes mobile phone telecommunications towers in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Telecom Sector Fundamentals Improved In March Quarter: India Ratings

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Fundamentals of the country's telecom sector improved in the March quarter on the back of price hikes in December, ability among telcos to reduce the churn of customers and more subscribers opting for 4G, according to a report.

India Ratings and Research on Wednesday also said that it believes the Covid-19 related lockdown has provided another strong fillip to the ongoing trend of 2G and 3G customers for telcos transitioning to 4G, driven by the needs of higher data download speed and limits.

It can be noted that the aggressive play by Reliance Jio since its 2016 entry into the market has left a deep impact on the telecom sector resulting in heavy losses being reported by companies and some market exits.

"Overall, operational trends continued to improve for the telecom sector in Q4 FY20 with ARPUs (Average Revenue Per User) for Bharti, Vodafone-Idea and Reliance Jio rising 14%, 11 % and 2 %, respectively, quarter on quarter," India Ratings said in the report.

The rise in ARPU was driven by a 20% tariff hike undertaken by the telecom companies in December 2019 and continued transition of customers from 2G/3G to 4G, it said.

Bharti Airtel's 4G base has risen 57%, Voda-Idea by 31% and Jio's by 26% as compared to the same period year-ago, it noted.

According to the report, Reliance Jio continued to gain in the subscriber market share even in Q4 FY20 but the pace of market share acquisition has slowed markedly in recent quarters amid declining competitive intensity in the sector.

About future trends, the report said internet traffic has seen an 11 % increase in April, which will augur well on the data usage front for the telcos.

The jump in data usage was due to a higher activity on aspects like movies and gaming during the Covid-19 related lockdowns, it added.

The agency said the ARPU goes up by Rs 50-70 a month if the subscriber opts for 4G service and that telcos can add Rs 9-10 on average to their ARPU over the next four quarters, assuming stable data prices.

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