New Delhi: Telecom major Bharti Airtel has raised mobile tariffs effective 3 July, following in the footsteps of Reliance Jio, which hiked tariffs on 27 June.
In an exchange filing, Airtel said it maintains that the mobile average revenue per user (ARPU) needs to be upwards of ₹300, to enable a financially healthy business model for telcos in India.
“We believe that this level of ARPU will enable the substantial investments required in network technology and spectrum and offer a modest return on capital. In this light, we welcome the announcements in the industry to repair tariffs. Airtel will also revise its mobile tariffs as indicated below, from July 3rd, 2024,” it stated.
On the price increase, Airtel said it was “modest” to not “burden customers' budget”
Airtel’s tariff increase ranges between 11% and 21% across prepaid plans and between 10% and 20% on postpaid plans. Its entry level prepaid plan will cost customers 11% more at ₹199 a month, up from ₹175 a month.
The baseline of the entry level tariffs were increased from ₹155 a month last year, thus making them more than 28% heavier on the consumer wallets within a year’s time. The sharpest increase of 20-21% will be on the full year validity plan costing ₹2,999 which will now be ₹3,599, and the 56-day validity plan which gives 2GB data free per day, which will now cost ₹579, up 21%.
The entry level postpaid plan will cost 12.5% more, up from ₹399 a month to ₹449 a month, while the ₹999 plan will now cost ₹1199, up 20%. This includes four connections, 190GB data with roll-over and annual subscriptions to Xstream Premium and Disney+Hotstar, and six months subscription of Amazon Prime, plus Wynk Premium.
“We have ensured that there is a very modest price increase (less than 70p per day) on the entry level plans, in order to eliminate any burden on budget challenged consumers,” it added.
The No 2 carrier’s tariff hikes are surprisingly lower than market leader Reliance Jio’s, which announced hikes between 12% and 25% on Thursday.
The No 1 carrier by subscribers backed by Reliance Industries Limited, was the first to announce the hikes, unlike previous instances where Airtel in 2021 and Vodafone Idea in 2019 led with any tariff changes. New plans from both companies will be effective from July 3 and will continue to have free voice calls and text messages bundled in.
However, Airtel has not segregated 5G tariff plans on the lines of Jio, which announced that it will give unlimited 5G data only on plans that provide 2GB data per day and above.
According to brokerages tracking the sector, they saw this move from Jio as a first step towards monetisation of 5G. “If consumers want to continue using unlimited 5G services, they will need to move to the 2GB a day plan costing ₹349. Thus consumers will have to pay 46% more to continue using 5G. We see this as a start of 5G monetisation,” said Kunal Vora at BNP Paribas in a note on Friday.
At present, Airtel and Jio are giving 5G services at the same tariffs as 4G. Airtel’s top boss Gopal Vittal has maintained that the carrier will not charge consumers a differential pricing or premium pricing for 5G services versus 4G services.
Vora added that the tariff hike coupled with moderation in capex bode well for the industry. Revenue growth is likely to remain in double digit as customers will upgrade to bundled plans, which will also boost free cash flows of carriers. A large part of the tariff hike was factored in by the market, which was seen in the strong rally of telecom stocks. Airtel’s scrip rose more than 71% over last year versus Nifty 50’s 28% gain, he noted.
Industry insiders expect Vodafone Idea to announce changes to its tariffs as well. The tariff hikes by carriers and a shift in focus to improving returns on investments by Reliance Jio, specifically, bodes well for the industry.
“Unlike, Bharti and Vi, who have been very vocal on the need for industry tariff repair, R-Jio has not been upfront about the need for industry-wide tariff hikes. However, as we noted earlier, the need for R-Jio to raise tariffs was equally (if not more) pressing, given: 1) its larger 5G investments; and 2) further moderation in RoCEs and FCF,” said analysts at Kotak Institutional Equities.
