Bharti raises prepaid tariffs by up to 25%, others may follow suit

‘Move will help improve financial health, 5G roll-out in India’

Bharti Airtel on Monday announced it was raising prepaid tariffs by up to 25% with effect from November 26.

The move had been necessitated by the need to increase mobile revenues to safeguard the business’s financial health, Bharti said.

Terming it one among the sharpest tariff increases in the past, analysts said other telecom companies —Vodafone Idea and Reliance Jio — were likely to follow suit as was the case in the previous industry-wise tariff hike cycle in December 2019.

“Bharti Airtel has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at ₹200 and ultimately at ₹300, so as to provide a reasonable return on capital that allows for a financially healthy business model,” the company said. For the second quarter ended September 2021, the company’s mobile ARPU stood at ₹153 as against ₹143 in July-September 2020. “We also believe that this level of ARPU will enable the substantial investments required in networks and spectrum. More importantly, this will give Airtel elbow room to roll out 5G in India,” Bharti said, adding that it was hence taking the lead in rebalancing tariffs.

The current basic plan of ₹79 will cost ₹99 from November 26. Likewise, the ₹149 plan will cost ₹30 more at ₹179, the ₹1,498 plan will become ₹1,799 and the ₹2,498 plan will cost ₹2,999. Data top ups will now cost ₹58 (up from ₹48), ₹118 (₹98) and ₹301 (₹251), respectively.

“From a timing perspective, this tariff hike is in-line with our expectations where we expected the telcos to inch up tariffs post the government relief. But from a magnitude perspective, we thought there was room for hikes to be 30%+,” BofA securities said in a note.

It added that telcos may look to do a couple of more hikes in the next 12-18 months so as to inch up ARPU to the long-term focused number of ₹300.

Edelweiss noted that Bharti Airtel had announced a 20–25% tariff hike across its prepaid data plans, which constituted 60–70% of revenue. “The tariff hikes augur well for the industry, and can potentially help Vodafone Idea (VI) raise capital to repay near-term debt obligation. However, for long-term sustainability, VI requires ARPU to nearly double over the next three to four years.”

Nitesh Jain, Director and Rakshit Kachhal, Associate Director, CRISIL Ratings, said the tariff hike was a much-needed step towards healing the profitability and the returns profile of the sector, and would also enable telcos to invest in rolling out 5G mobile services over the medium term. “Assuming other telcos follow suit, and given the rising data consumption, the current hike should increase the sector ARPU by 15-20% to ₹155-160 next fiscal from ₹135 last fiscal.”

Source: Read Full Article