From November 26, the telco’s price of its entry level plan will be 25% more expensive at ₹99, while 11 other mobile phone plans and three data packages will be around 20% dearer.
Industry experts expect loss-making Vodafone Idea and Reliance Jio to also follow Airtel and raise rates. The Mukesh Ambani-owned telecom market leader though is expected to maintain its 10-15% pricing discount to its rivals. The two telcos didn’t respond to ET’s emailed queries.
Analysts estimate the much-awaited tariff hikes-effective November 26-across prepaid plans to immediately trigger a 6% rise in Airtel’s ARPU from ₹153 at September end and an 8% increase in earnings before interest, tax, depreciation & amortization (Ebitda) in FY22 as the gains will start flowing through from the fiscal fourth quarter itself.
Overall gains on these scores, they estimate, would be significantly higher through FY23-24, especially since prepaid users account for over 95% of the Sunil Mittal-led telco’s subscriber base and over 85% of its revenues.
“Bharti Airtel has always maintained that the mobile average revenue per user (ARPU) needs to be at ₹200 and ultimately at Rs 300, so as to provide a reasonable return on capital that allows for a financially healthy business model,” the Sunil Mittal-led telco said in a statement.
It added that this level of ARPU will enable the substantial investments required in networks and spectrum and will also give Airtel the elbow room to roll out 5G in India, it added. “Therefore, as a first step, we are taking the lead in rebalancing our tariffs during the month of November.”
Monday’s early morning announcement pushed the shares of India’s second largest telco to its all-time intraday high of ₹756, before closing up 3.9% at ₹742.05 on the BSE. Shares of cash-strapped smaller rival Vodafone Idea also surged over 9% intra-day before closing 6.2% higher at ₹10.60 on hopes that it will also follow Airtel in a bid to repair its balance sheet.
Airtel, along with its rivals, had last raised rates across plans in December 2019, which raised the sector’s ARPU by around 15% and improved its Ebitda by around 35% to around ₹72,000 crore in fiscal 2021, Crisil Ratings said.
Then, in July 2021, Airtel and Vodafone Idea took segmented tariff hikes in base prepaid plans and some corporate plans. But both stayed away from tinkering with rates in the lucrative prepaid smartphone users segment that garners bulk of telco revenues in India, for fear of losing users to Jio.
JP Morgan said Airtel’s Monday tariff hike announcement “was long overdue” and is the first step towards ARPU repair for Bharti as well as the industry,” adding that it expects Vi and Jio to “follow suit” with tariff hikes on their respective prepaid plans.
