The much-awaited 5G services are rapidly catching up with consumers, as telecom majors carry out beta trials in several cities. While Bharti Airtel is currently undertaking such trials in eight cities, Reliance Jio’s testing is also underway in six cities.
Vodafone Idea, however, hasn’t mentioned any specific timeline. It is expected to roll out 5G network progressively over the next few years.
The progress is reflected in the telcos’ September quarter results as well. Bharti Airtel’s consolidated net profit jumped 89% year-on-year on a 22% revenue growth in Q2.
The company aims to provide 5G services across all of urban, and key rural areas by March 2024.
Reliance Jio’s net profit, on the other hand, rose 28% YoY during the quarter. Jio targets complete 5G rollout by December 2023
Both Jio and Airtel saw their average revenue per user growing sequentially to Rs 177.2 and Rs 190, respectively.
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Against this backdrop, the prospects for the telecom sector remain bright. Analysts believe affordably-priced 5G services will likely be another disruptor for the industry.
Independent market analyst Ambareesh Baliga believes 5G likely to be a big disruptor for the industry. He says, domestic telcos set to be the biggest beneficiaries of 5G. 5G to further divide between Reliance, Airtel with Vodafone in the last place. The industry is set to operate as a duopoly in the longer run
On the bourses, Bharti Airtel has rallied the most among peers so far during FY23 with a 10% gain. While Vodafone Idea has shed 11% during this period as compared to a 4% rise in the BSE Sensex.
However, analysts at Jefferies have downgraded Bharti Airtel’s stock to ‘hold’ as they believe its growth potential has largely been factored in.
With upcoming state elections, tariff hikes are more likely to take place in Q4. Besides, network costs, as well as operating expenses, are likely to rise faster amidst 5G rollout and launch, according to Jefferies.
The rush to launch 5G services will also benefit telecom equipment providers, analysts say.
Stocks of Nelco, ITI and HFCL, for instance, have gained 5 to 16% so far since April.
Ambareesh Baliga says he is bullish on HFCL, Sterlite Tech on order flows with 5G launch.
Besides, HFCL has recently been selected among 42 others for the production-linked incentive scheme for telecom and networking products to support import-dependent verticals of 5G equipment.
That said, the market will track global cues today ahead of the US Fed’s policy outcome. The Street will also monitor the Q2 results of Adani Transmission, JK Paper, and M&M Financial Services are some of the prominent companies that are scheduled to announce their respective September quarter results on Wednesday.