Why tariff hikes by Airtel, Jio,Vi were inevitable

What’s behind the price rise: the ARPU target

“Bharti Airtel has maintained that the mobile Average Revenue per User (ARPU) needs to be upwards of INR 300, to enable a financially healthy business model for telcos in India,” Airtel said in a statement.

“In this light, we welcome the announcements in the industry to repair tariffs.” In the quarter ended March 2023, Airtel’s ARPU stood at Rs 209. Jio’s ARPU for the quarter was Rs 181.70 and VI’s at Rs 146.

In 2016, when Jio announced the launch of its 4G services – first for free for at least a year and then at much cheaper rates than its competitors – it disrupted India’s telecom sector. It led to India having the cheapest data rates of anywhere in the world, and resulted in a boom in the number of people accessing online services. However, for a while now, the industry has been calling for a gradual increase in prices which would help their financial health.

As per an analyst note by Bernstein, there was an anticipation that the telcos will raise prices post the general elections. It said that for Airtel, its ARPU should stabilise to Rs 280 by FY26 and at Rs 300 by FY27.

The beginning of 5G monetisation

With the addition of 5G services to their kitty, for which all the three major telcos spent top dollar, there was also a question on when telecom companies will make a move towards monetising their 5G services, which for a while were being offered at similar prices with no separate pricing. It appears that time has now come.

A note by JP Morgan makes the shift clear: “The fact that Jio, the sector price setter, has led the tariff hikes rather than (Airtel/Vi) as in prior rounds is a statement of intent that its focus has shifted from share gains to monetisation,” it said in an analyst note.

“Jio premiumised 5G access by increasing the threshold for unlimited 5G data to 2GB/day plans from 1.5GB/day plans that effectively drives a 46 per cent increase in tariffs for 5G users, 2x the overall hikes driving 5G monetisation,” JP Morgan added.

The recently concluded spectrum auctions saw a muted response by telcos, fetching just over Rs 11,340 crore to the exchequer — a mere 12 per cent of the government’s reserve price of Rs 96,238 crore. However, in 2022, the companies had spent upwards of Rs 1.5 lakh crore to acquire 5G spectrum.