Vodafone Idea and Reliance Jio are expected to follow Airtel’s move to increase mobile tariffs which will push up average revenue per user (ARPU) for the operators by about 18 per cent, according to analysts.
“We believe the tariff hike was long overdue and is the first step towards ARPU increase for Airtel as well as the industry. We expect both Vodafone IDEA and RJio to follow suit with tariff hikes on prepaid plans. This should be a positive for all key incumbents,” said a report by JP Morgan.
Also read: Airtel hikes prepaid tariffs by 20%
“Today’s tariff hikes should drive an 18 per cent increase in ARPU/revenues and 24 per cent EBITDA increase for India wireless in FY23/24,” it added.
Airtel today announced tariff hikes across all prepaid plans, with the lower end ₹79 plan seeing a 25 per cent hike, and other plans seeing a 20 per cent tariff hike. These new tariffs will be applicable from November 26. While all operators have been making minor tweaks in their plans to gradually improve tariffs, this is the first step towards a significant “across-the-board” tariff hike since Dec 2019.
“Considering the liquidity situation of Vodafone Idea, we think it is highly likely they follow suit. This would also help the company in their fund raising process which has been delayed so far. Our base case remains that Jio follows as well, but we will closely monitor the timing of their move and whether the company offers any temporary relief as it offered in Dec 2019. If Jio follows suit, this is a significant positive for the sector as a whole, as it gives a near term boost to ARPUs. On the other hand, it remains to be seen whether Bharti may be forced to retract the price hike if Jio does not follow suit,” said a reserach report by UBS Securities Asia Limited
“Ee had highlighted that in our model we build in a gradual increase in ARPUs of 10% annually over FY22-24e, driven by a combination of secular trends such as 2G to 4G / prepaid to postpaid migration, as well as gradual tariff increases. This tariff increase, assuming other operators follow, brings forward that ARPU expansion to a shorter time frame (next 2-3 quarters),” it added.
