07/04/2025
In June 2024, the Indian telecom sector experienced significant developments, notably characterized by a subdued spectrum auction and subsequent tariff hikes announced by major telecom companies. The much-anticipated spectrum auction concluded on June 26th, garnering a muted response from telecom companies, resulting in airwave sales worth ₹11,340.78 crore – the third-lowest amount since competitive bidding began in 2010. The tepid participation was attributed to high reserve prices set by the government and financial strain on telecom operators. Despite this, Bharti Airtel and Vodafone Idea (VIL) secured key spectrum acquisitions to bolster their network capabilities. Bharti Airtel renewed 41.8 MHz of expiring spectrum in the 900 MHz and 1800 MHz bands and acquired an additional 11 MHz in the 900 MHz band, 24.2 MHz in the 1800 MHz band, and 20 MHz in the 2100 MHz band to enhance mid-band and sub-GHz holdings, particularly for indoor coverage. Similarly, VIL renewed 12.4 MHz of expiring spectrum in the 900 MHz and 1800 MHz bands and added 17.6 MHz across the 900 MHz, 1800 MHz, and 2500 MHz bands, aiming to improve 4G coverage in select priority circles.
Despite the auction’s underwhelming results, the subsequent announcements of tariff hikes by Reliance Jio and Bharti Airtel marked a significant shift in the industry. These hikes, ranging from 10% to 25%, are expected to boost the Average Revenue Per User (ARPU) – a critical metric for profitability in the telecom sector. Bharti Airtel and Reliance Jio are projected to benefit from a 16-18% increase in ARPU due to the tariff hikes, while VIL, yet to announce its hikes, is anticipated to gain substantially from market dynamics and potential ARPU improvements. Jio strategically raised its lower-end monthly plans by 19-25%, compared to 13-17% for higher-end plans, aiming to drive higher ARPUs given the existing subscriber mix. For instance, the entry-level prepaid plan rose from Rs 155 to Rs 189 (22% hike), and the Rs 239 plan increased to Rs 299 (25% hike). Postpaid plans also saw increases, with entry-level plans now at Rs 349, reflecting hikes of 17% and 13%.
The coming months will be pivotal for the Indian telecom sector, with key factors to watch including the success of the tariff hikes in boosting ARPU, the ability of telecom companies to invest in network upgrades, and potential market share shifts towards Bharti Airtel and Reliance Jio. The government auctioned a total of 10,522.35 MHz of spectrum across various bands, valued at Rs 962 billion at reserve prices. Spectrum bands included 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz, and 26 GHz, with Reliance Jio depositing the highest earnest money deposit of Rs 30 billion, followed by Bharti Airtel with Rs 10.5 billion and VIL with Rs 3 billion. Around 141.4 MHz of spectrum were sold in the auction. If these tariff hikes and spectrum acquisitions translate into improved ARPUs and successful network enhancements, the sector could attract further investment, paving the way for sustained growth and a re-rating of telecom stocks in the near future.