Kids in School are aware now talking of Indian Inflation which is unheard off amongst kids in the rest of the World. We ran a quick analysis on the impact of Inflation on Wireless Service Providers and here is our take on the same.
GSM ARPU is at Rs130 (Rs75 for CDMA) – TRAI Average and ARPU is different for Different Operators. The low absolute level and its relatively small contribution to overall household consumption spend (~4%) means that it is less susceptible as families reallocate monthly budgets to counter the food inflation. Interestingly this mobile “budget” spend (%) has remained broadly stable in the last 3-4 years. The high users (post-paid) should anyway be not impacted by this budgetary constraint.
Rural consumers tend to have lower disposable income compared to the national average and as a result are more vulnerable. However, we believe that any impact on the overall usage should proportionate to their subscriber base 1) rural subs currently are only ~35% of the total base (still lower in revs), 2) rural penetration is still ~30% (65% overall) and therefore subs currently on the system are of relatively higher quality and 3) good agricultural growth.
Finally, we believe there are bigger stock influences for operator profitability – regulation, competition and consolidation. What do you say ?