Bharti Airtel Ltd and Vodafone Idea Ltd are expected to raise their tariffs following Reliance Jio’s announcement of new unlimited plans slated to take effect on July 3. Industry insiders suggest this decision by Jio, unveiled on Thursday, aims to boost the average revenue per user (ARPU) significantly.
Reliance Jio’s revised tariff structure introduces new unlimited plans, marking a strategic push to increase ARPU. This initiative aligns with Jio’s broader objectives to enhance revenue and strengthen its market position. The impending changes come as a part of the telecom giant’s effort to navigate the highly competitive and price-sensitive Indian market.
Bharti Airtel and Vodafone Idea have consistently advocated for tariff hikes as crucial for the industry’s sustainable growth. The anticipated tariff increases by these companies follow a pattern of industry-wide adjustments, with the last major hike occurring in December 2021, raising tariffs by about 20%. Previously, in December 2019, the industry saw its first significant increase post-Jio’s market entry in 2016, with tariffs spiking by 20-40%.
Bharti Airtel’s Managing Director, Gopal Vittal, emphasized the need for substantial tariff repair during the company’s Q4 earnings call on May 15. Vittal described the current tariff levels as “absurdly low” and reiterated the goal of elevating the ARPU from Rs 200 to Rs 300 to maintain industry viability. Airtel’s previous tariff hikes in 2019 and 2021 provided an ARPU uplift of Rs 30 and Rs 36 over four quarters, respectively.
Vodafone Idea’s CEO, Akshaya Moondra, echoed these sentiments in an earnings call on May 17, highlighting the necessity for a tariff hike. Moondra pointed out that price recovery needs to be gradual, allowing the higher-paying customers to contribute more, a concept that has faded in recent years. The telco, grappling with financial challenges and customer attrition due to insufficient network investment, views tariff correction as essential for achieving reasonable returns.
Vodafone Idea’s turnaround hinges on the implementation of tariff hikes. The company has been struggling with losses and a shrinking customer base, exacerbated by limited network expansion. Following a Rs 18,000 crore equity infusion through its follow-on public offering (FPO) in April, Vodafone Idea is in discussions with lenders to secure Rs 25,000 crore in debt for capital expenditure.
Analysts predict accelerated industry growth in the coming quarters, driven by expected tariff hikes. BNP Paribas projects the Indian telecom sector’s revenue growth to sustain double-digit levels over FY 2024-26, supported by tariff increases and a shift towards bundled plans. ICICI Securities analysts anticipate that all three major telecom operators will successfully translate the entire tariff hike into revenue without much losses.
