February 3, 2023

Bharti Airtel has extended the sharp hike in base prepaid rates it took recently in Odisha and Haryana to seven more markets and will take the hikes pan-India later this week in a clear bid to boost average revenue per user (ARPU) beyond the Rs 200 level.

The Sunil Mittal-led telco’s pricing aggression raises the possibility of another round of industry-wide rate hikes just over a year after the last one.

At press time, Reliance Jio and Vodafone Idea (Vi) did not reply to ET’s queries on whether they would respond to Airtel’s latest tariff cues.

Airtel on Tuesday discontinued its lowest recharge plans in Andhra Pradesh, Bihar, HP, Rajasthan, Northeast, Karnataka and UP-West, effectively increasing the base rates in these states by 57%.

The minimum monthly recharge plan in these markets for prepaid users now starts at Rs 155, but comes with unlimited voice calling, 1GB data and 300 text messages. Earlier, Airtel had a minimum plan with a talk time value of Rs 99 and 200MB of mobile data with 28-day validity in these states, which now stands withdrawn.

Last November, Airtel had raised base recharge rates in Odisha/Haryana to test the waters and was widely expected to extend the move to other states.

“In line with our focus on providing better customer experience, we have discontinued the metered tariff from today and introduced an entry-level plan of Rs 155 with unlimited voice, 1GB of data and 300 text messages in seven more circles,” an Airtel spokesperson told ET.

Airtel believes the new minimum recharge plans will lend greater flexibility and superior value to customers.

Airtel’s stock closed 0.36% higher at Rs 775.50 on the BSE Tuesday.

The telecom industry last undertook a tariff hike of 20-25% in November 2021.

Analysts expect Airtel’s higher minimum recharge plans to be rolled out pan-India, which while boosting domestic wireless business revenues could lead to some entry-level users discarding multiple SIMs.

They estimate Airtel has around 109 million non-data users out of its near 328 million-strong India mobile user base. “Roughly 33-40 million could be sitting on the minimum recharge plans, with potential ARPU of Rs 95… assuming a 48% jump in ARPUs from this bucket, and potential SIM consolidation of 5-7mn, we think this move could be 1.3-1.5% accretive to revenues of Bharti’s India mobile business,” Morgan Stanley said in a note.

Airtel’s ARPU stood at Rs 190 in the quarter ended September.

The brokerage also expects competition (read: Reliance Jio and Vodafone Idea) to follow suit eventually, saying it won’t disturb market share dynamics.

SIM consolidation, typically, causes a drop in the number of mobile connections when consumers discard multiple SIMs and even make fresh choices on their preferred telco brands after a round of price hikes.

ICICI Securities in a recent note had said that if the competition follows Airtel’s move, it would result in faster deleveraging of balance sheets and boost generation of free cash flow, both being critical to telcos as they are currently spending top dollars to roll out 5G networks.

Analysts said that recent weakness in Airtel’s share price was primarily driven by concerns around a potential delay in tariff hikes in the India wireless business amid rising competition from Jio and inflation being a key concern for the government in the run-up to the election phase over the next 18 months.

“Industry needs significant tariff hikes in the medium to long term, especially as telcos aggressively roll out 5G, pan-India,” J M Financial said.

It added the telecom industry requires an ARPU of Rs 256-285 in the next 3-5 years for a pre-tax RoCE of 12-15% to justify capex. This, it expects, will come via a mix of tariff hikes, continued mobile broadband (MBB) upgrades resulting in rise in data usage.

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