It seems like the worst phase of the telecom industry is over if the latest trend of the adjusted gross revenue or AGR is to be believed. According to the latest AGR trend, it has been rising steadily for the past two and half years. In July-September 2021, the AGR was INR 53, 510 crores, which is the highest so far. Previously, when the AGR of the telecom industry touched INR 50,000 crore was back in April-June 2016 with INR 53,383 crore. Growth in the AGR also plays a positive role for the government as the government revenue from this sector as a license fee of the operators is at 8% of their AGR.
Telecom Industry Bloomed During The Pandemic
After the AGR growth in April-June 2016, it declined for several quarters as a result of the entry of Reliance Jio which resulted in a tariff war amongst the telecom operators. The industry gained some stabilization back in July-September 2019 and since then, it has been growing with consistency with a slight deflection during April-June 2020. It is because, during the pandemic, when people were suffering from low income and were dependent on sources like Lottery Sambad and Dhankesari for making their livelihood, many telecom operators offered freebies to their subscribers.
During the pandemic, when work from home became the new normal, the telecom industry saw huge growth and its revenue touched new heights. This holds true for almost all the telecom partners who saw a considerable increase in their revenue. According to a report by CLSA, 2021, the second wave of COVID-19 and the lockdown that followed it resulted in an increase of 15% in revenue in the telecom sector. It also resulted in increased penetration of 4G connection along with tariff hikes and data usage.
According to the report, the revenue in the mobile sector will further grow in 2022 as all the operators are considering a 20% hike in the prepaid tariff. The tariff hike was initially made by Bharti and the trend was followed by Vodafone Idea and Reliance Jio.
Telecom Industry Revenue Growth To Return To 4-5%
It is believed that in April-June FY23, the telecom industry revenue growth will return to the 4-5% level again. It is because the impact of the tariff hike will be captured in this quarter. According to the recent trend of the telecom industry, the user base of the industry will only be housing the active users as the minimum cost of mobile services has increased to INR 99. In the first quarter of FY22, Jio has engaged in massive clean-up of the low-paying customers and this has made the telecom operator boost its active user base. Further, an improvement in the visitor location register was also seen.
Gopal Vittal, MD of Bharti Airtel has recently said that the telecom operator will not be hesitant in going for another tariff hike in 2022 in order to boost its average revenue per year (ARPU). Recently, Airtel has been preparing to increase its ARPU to INR 200 and eventually, it will meet its target of ARPU of INR 300.
Current Telecom Industry Scenario In India
The internet connection growth in India from 2014 to 2021 is 231%. The telecom industry has generated total employment of four million and there are currently more than 607 million unique 4G enabled smartphones. It is expected that by 2025, the digital economy of the country will grow to $1 trillion and the number of active internet users will increase to 900 million. Further, India is aiming to manufacture mobile phones worth $126 billion by 2025-26.
Over time, the number of mobile towers has tremendously increased in India. The number of mobile towers in India in 2014 was approximately 4,00,000 and in 2021, it grew to 6,60,000. Similarly, there has been a growth in the mobile base transceiver stations too. Further, it is expected that the new 5G technology will boost the Indian economy. The growth drivers of the telecom industry in India are PLI Schemes under Atmanirbhar Bharat Abhiyan, telecom sector reforms, Bharatnet project, PLI schemes and Prime Minister Wi-Fi Access Network Interface. In addition to that, India has one of the highest consumers of data per day. All these things have together worked in the favor of the telecom industry.