DNA Money Edit: Will telecom sector reverse falling trend?

India’s telecom sector may be on its way to reclaiming some of its lost glory this fiscal. Many believe the pricing power will soon return, helping the incumbent players such as Airtel and Vodafone Idea improve their financials. This year, green shoots are expected in telecom players’ revenues and average revenue per user (Arpu), a key matrix for profitability.

The industry has been witnessing a brutal price war since the entry of Reliance Jio, though it opened the sector for 4G like never before. The profitability and revenues of the incumbents have nosedived. Hyper-competitiveness also pushed BSNL and MTNL, both state-owned, to the brink.

A report by Crisil said the telecom industry would reverse the two-year declining trend with a 7% revenue growth in 2019-20 and the turnaround will ride on an increase in Arpu by 11%. Higher data usage and introduction of minimum recharge plans by Airtel and Vodafone Idea are expected to translate into higher Arpu. Another report by Edelweiss said the price recovery could take place from the second half. Telecom players may raise prices as mobile broadband subscriber penetration reaches nearly 65%. With RJio close to achieving its target of 400 million subscribers, a price hike looks imminent.