India's second largest telecom operator Bharti Airtel has announced a hike in mobile tariffs by as much as 10-21 percent, following Reliance Jio. Sunil Bharti Mittal's telecom firm said it will revise mobile tariffs from 3 July 2024, with a 'very modest' price increase of less than 70 paise per day on entry-level plans.
Bharti Airtel maintained that the mobile telecom service Average Revenue per User (ARPU) needs to rise above Rs 300 for the financial health of the telecom businesses 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," the telecom firm said in a statement.
Further, Bharti Airtel said that the company welcomes the industry announcement to 'repair tariffs'.
Earlier this week, Reliance Jio revised mobile tariffs, unveiling a series of new unlimited plans with effect from 3 July 2024. The new tariff plans range from Rs 189 for 2 GB per month to Rs 3,599 for 2.5 GB per day annual plan. These plans include unlimited 5G data for all plans with 2GB/day and above.
Following this, a revision in mobile tariffs by Bharti Airtel and Vodafone Ideas were widely anticipated. Telecom firms in India have long advocated tariff increases as essential for sustainable growth.
Bharti Airtel and its Chairman Sunil Mittal have repeatedly expressed the need to increase the current ARPU from about Rs 200 to Rs 300 or more. "We need to be at the Rs 300 ARPU level. First pitstop was Rs 200. That’s taken five to six years," said Mittal in an interview to Moneycontrol in February this year. Bharti Airtel's ARPU topped Rs 200 (at Rs 208) in Q3 FY24.
The last industry-wide tariff hike of about 20% was in December 2021. Before that, telcos hiked tariffs in December 2019, the first one after Jio launched its service in 2016.
The 2019 hike increased the tariff by 20-40%, while the 2021 hike saw an increase of 20%, providing an ARPU uplift of Rs 30 and 36 over four quarters to Airtel, respectively.
The earlier two hikes of 14-30 percent pushed ARPU up by 10-16 percent for Bharti Airtel and Jio, implying an ARPU transmission rate of 50-70 percent.
"We assume a similar transmission rate this time around. The full effect of this tariff hike will be visible in the December quarter," Axis Capital said in a note seen by Moneycontrol.
"We believe the Airtel's tariff hike announcement could give an immediate boost to stock sentiment, as seen in 2019 and 2021. However, we believe this tariff hike won’t necessarily lead to any material upgrade to our/ consensus EBITDA estimates," Morgan Stanley said in a separate note.
Analysts expect the industry growth rate to accelerate in coming quarters, led by tariff hikes.
BNP Paribas expects the Indian telecom industry’s revenue growth to remain in double digits over FY 24-26, led by tariff hikes and customers upgrading to bundled plans.
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