October 23, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Airtel’s cashback offer on smartphones to drive ARPU growth for them, says CLSA report

Bharti Airtel’s recent cashback offer on purchase of smartphones priced upto Rs 12,000 is likely to drive 2G customer migrations to 4G and also prove average revenue per user (ARPU) -accretive for the Sunil Mittal-led telco in coming quarters, analysts said.

They also expect the Rs 6,000-cashback offer to help Bharti Airtel ringfence its 2G user base by limiting churn and containing the impact of

’ upcoming budget 4G smartphone, JioPhone Next, due out around Diwali. Jio is known to be targeting bulk of Airtel and Vodafone Idea’s near 300 million combined 2G users with the JioPhone Next smartphone, developed with Google.

“Bharti’s cashback offer is targeted at migration of 2G subscribers to 4G services, which will likely be ARPU-accretive and also reduce churn,” CLSA said in a report. It added that the “timing is positive too, ahead of the JioPhone Next launch in November”.

To avail of the recently launched cashback benefit, a customer needs to recharge with an Airtel prepaid pack of Rs 249 or above continuously (as per pack validity) for a period of 36 months. The customer can receive cashback in two parts — the first installment of Rs 2.000 after 18 months and the remaining Rs 4,000 after 36 months. Smartphones replaced or lost within the 36 month span won’t be covered.

Bharti Airtel has around 137 million 2G users that are yet to go 4G, and analysts also expect the telco to target churn from peers such as Vodafone Idea (Vi), and accordingly, expect the cashback offer to accelerate 4G subscriber ramp-up in coming months.

Some analysts, though, said any meaningful ARPU gains for Airtel would come only if sizable volumes of customers opt for the telco’s cashback offer every month. This, they said, could be tough as India’s price-sensitive consumers, typically, prefer instant cash discounts to waiting for as long as 18-to-36 months for refunds.

“Airtel would need to get at least 4-to-5 million 2G users to opt for the new cashback offer and go 4G every month to ensure meaningful ARPU growth…this might not be easy as many customers might not be disciplined enough to keep recharging regularly to avail of the refunds after 18/36 months,” said an analyst at a leading foreign brokerage.

He added that “ARPU growth would also hinge on how many Airtel customers persevere and qualify for the cashback as risk of disqualification is high, given that they won’t be eligible if they miss out even on a single monthly recharge or change or lose handsets during the 36-month period”.

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