Bharti Airtel said that the 'real' improvement in its average revenue per user (ARPU) and 5G monetisation will happen only with tariff repair or tariff hikes in the market, even as the telco continues to see an organic increase in its ARPU.
“We have seen an improvement in the ARPU, in the absence of tariff hikes…there is a movement up in terms of average revenue per user on an organic basis,” Gopal Vittal, managing director and chief executive, said during the Q3 investor call on February 6.
Vittal said that Airtel’s ARPU is seeing a modest improvement every quarter due to feature phone-to-smartphone migration, postpaid data monetization, international roaming, and subscribers shifting to higher price plans.
“The real improvement will come only if there is a tariff repair. It's not a question of if it will happen. It's a question of when it will happen,” he added.
Bharti Airtel on February 5 reported a consolidated net profit of Rs 2,442.2 crore for the October-December quarter, growing 54 percent from the same quarter a year ago. Its revenue came in at Rs 38,339 crore, up 6.3 percent from Rs 36,062 crore in the year-ago period, Bharti Airtel said in an exchange filing.
The company’s mobile average revenue per user per month (ARPU) was at Rs 208 - better than estimates - and up nearly 8 percent against Rs 193 in the same quarter last year. The ARPU was driven by a "consistent strategy of acquiring high-value customers and improved realisations.
5G monetisation is a challenge
Airtel does not plan to bring differential pricing for its 5G service for regular subscribers. It said such a move would impact the 5G adoption.
Airtel currently has 65 million 5G users across the country. Vittal said that 25 percent of the total smartphones in the industry will be 5G-enabled by March 2025.
“5G has become really about free data today in India. Free data on 5G is a headwind on any sort of monetisation as far as 5G is concerned.,” Vittal said, adding that there is no real 5G monetisation on the consumer business side.
He, however, said that it's Fixed Wireless Access (FWA) service will give it some ability to monetise the latest technology, but that will be “modest” given the amount of capex that went into 5G deployment.
The company has started its work on the private 5G front and is working with an auto ancillary manufacturer, a handset manufacturer, and an industry equipment maker. “Some of these companies are looking to deploy private 5G. We have indeed deployed four or five such projects. but, this is a smaller part of the overall monetisation…this is not meaningful in any sense,” Vittal said.
Airtel to discontinue 2G in coming years
The top executive said 2G technology’s contribution to Airtel’s business has become relatively small and is in the ballpark of around 17 percent, and the next few years, a substantial amount of its 2G customers will disappear.
“In markets like Gujarat, Maharashtra, Kerala, Mumbai, and Delhi, they are in single digits. But you still see reasonably high contributions in markets like Bihar, UP, MP, Chhattisgarh, etc. In my sense, in the next few years, you should start seeing substantial, almost disappearing, use of 2G. We can decide what we do then,” Vittal said.
“The amount of spectrum that we use is very limited for 2G. It's used dynamically long with 4G networks,” the executive added.
The executive said that Airtel’s Capex will moderate in the next fiscal year after an elevated Capex for the ongoing fiscal due to a large scale of 5G rollout, including rural expansion and the telco’s investments in other businesses, including data centres, B2B and home broadband.
“We had said that capex is going to be elevated this year. In the longer term, what the capex-to-revenue ratio should be, I think it depends on what happens to the industry in terms of tariff repair. And with tariff repair, capex to revenue will drop further. You see most global telcos operate between 15 to 20 percent. There is no reason for Airtel not to operate at that level in the future,” he said.
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