Early signs of tariff hike are encouraging; reasonable returns for industry only at Rs 300 ARPU: Airtel MD

Early signs of tariff hike are encouraging; reasonable returns for industry only at Rs 300 ARPU: Bharti Airtel MD Gopal Vittal

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26 Aug, 2025 12:21

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Bharti Airtel’s managing director, Gopal Vittal, said that early signs of the tariff hike are encouraging, with a total impact expected on financials in two quarters. He added that reasonable returns on investment in the industry will be available once the APRU reaches the Rs 300 level.

“The industry undertook a round of tariff repair in early July, which was much needed for the industry's financial health. The early signs from this repair are encouraging, with a full flow-through expected in two quarters,” Vittal said during the Q1 earnings call on August 6.

“I do want to underscore that the industry needs a minimum of Rs 300 ARPU for long-term sustainable investment and respectable return ratios… Tariff repair, we believe, should support improvement in financial health and a modest improvement in return ratios,” he said.

The average revenue per user (ARPU) per month, an important metric used by telecom companies to measure revenue generation, increased 5.5 percent year-on-year to Rs 211 in June quarter.

The tariff repair will help create more operating leverage, where the return ratio or overall return on capital improves modestly, he said.

“Our business's return on capital is still hovering around 9% at the India level, which is abysmally low. Consequently, because we are a fixed-cost business, we are capital-heavy. It's not good enough, but it certainly improves from where it is. And once you get to Rs 300, there'll be reasonable returns in the industry,” he added.

Even before the tariff hikes by all three private telecom operators, Airtel managed to grow its top-line revenues through several interventions around ARPUs over the last two to three years. “Of course, the benefit of a repair in the tariff gives you a lot more operating leverage, where the return ratio, overall return on capital, improves modestly,” he said.

Vittal admitted that Airtel has seen some SIM consolidation at the lower end of the market, particularly around the 2G user base in the early weeks after the tariff hike came into effect.

“But the SIM consolidation that we've seen is modest, and I think only time will tell how that will play out,” he said, adding that the consolidation is in line with industry standards.

He, however, added Airtel hasn’t seen any customers moving to low tiered data packs following the tariff hikes.

“Yes, there is some reappraisal that happens during this period whenever tariffs go up, and there is some delay of recharges, all of that. My hope is that this will all unwind as we go through the quarter and let's see how that plays out,” he said.

Bharti Airtel reported on August 5 that its Q1FY25 net profit swelled 158 percent year-on-year to Rs 4,160 crore from Rs 1,612 crore in the corresponding quarter last year, beating Street expectations. This was mainly helped by exceptional items. Consolidated net profit before exceptional items for the first quarter was Rs 2,925 crore.