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Tuesday, July 23, 2024

Bharti Airtel increases tariffs by 11-21%, following Reliance Jio

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In Short:

Bharti Airtel increased mobile tariffs for all prepaid and postpaid users to boost average revenue per user (ARPU) following similar moves by rival Reliance Jio. The hike, the first since 2021, aims to strengthen ARPU amidst 5G investments. Analysts predict revenue impact by second and third quarters of FY25. Airtel MD emphasized the need for tariff repairs at an industry level for better return on capital. Customers seem willing to accept potential tariff hikes.

Bharti Airtel Raises Tariffs for Prepaid and Postpaid Users

Bharti Airtel announced on Friday that it has increased tariffs for all its prepaid and postpaid users. This move is aimed at boosting the average revenue per user (ARPU) following a similar action by rival Reliance Jio.

Airtel stated, “The mobile Average Revenue per User needs to be upwards of INR 300 to support a financially healthy business model for telcos in India. We believe that this level of ARPU will enable the necessary investments in network technology and spectrum.”

The telecom company will implement the revised mobile tariffs starting July 3, with a minimal price increase on entry-level plans to alleviate the impact on budget-constrained consumers. Vodafone Idea is also anticipated to adjust its rates accordingly.

Tariff Hike to Boost ARPU

This rate increase marks the first significant adjustment by a telco since 2021, as telcos aim to strengthen ARPU amidst the absence of 5G service monetization, despite substantial investments in spectrum and network infrastructure.

<p>Source: Bharti Airtel press release on Friday (June 28, 2024). </p>
Source: Bharti Airtel press release on Friday (June 28, 2024).

Jio and Airtel have collectively invested over Rs 2 lakh crore in 5G infrastructure, but have yet to see returns on their investments. The recent rate hikes are part of the effort to optimize existing investments before further capital expenditure.

Analysts’ Insight

Analysts predict that the impact of these rate hikes on telcos’ revenue will materialize in the upcoming quarters of FY25, with potential growth in sectoral ARPU in the following years. A substantial hike in headline rates post-elections is deemed necessary to drive ARPU growth within the industry.

In a recent survey, it was found that a significant portion of Jio and Airtel users are willing to support a potential tariff hike, indicating consumer readiness to adapt to the revised rates.

In conclusion, the telecom sector is undergoing adjustments in tariffs to enhance revenue streams and propel financial viability for future investments.

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