January 22, 2022

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

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

Telecom tariffs: Bharti Airtel, Vodafone Idea likely to hike postpaid rates

Analysts feel that a postpaid hike can be expected after a few months.Analysts feel that a postpaid hike can be expected after a few months.Analysts feel that a postpaid hike can be expected after a few months.

After hiking prepaid tariffs, telecom operators may look at raising rates in the postpaid segment also shortly. It makes sense for Bharti Airtel and Vodafone Idea to raise tariffs in the postpaid segment because they have a meaningful presence here. Further, customer stickiness is high in the postpaid segment and pricing plays a very limited role in the purchasing decision, so raising tariffs does not lead to a churn, something which is a possibility in the prepaid segment.
Bharti Airtel had hiked tariffs in the postpaid segment for corporate users in July and also tweaked its family plan.

The postpaid market is worth around `22,000 crore in revenue terms and forms 15% of the sector’s revenues and 5% of sector’s active subscribers, according to estimates by Jefferies. Around 50-60% of these subscribers are enterprise customers, and 34% of postpaid subscribers are situated in the three metros and another 36% in urban centric A-circles. Among operators, Vodafone Idea has the highest 43% market share followed by Bharti Airtel at 28%.

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If we take the case of Bharti, around 50-60% of its postpaid subscribers are enterprise customers, so their focus is less on pricing and more on sustained track record of service delivery. Further, if Bharti has so far maintained a premium in tariffs as compared to that of Jio’s even in the prepaid segment and managed churn quite well, it is unlikely that it would face risk if it raises tariffs in the postpaid segment. Postpaid users form 5% of Bharti’s subscribers and 16% of its India mobile revenues.

“I think I will be surprised if postpaid rates are not increased, such tariffs will see a hike. Why would they delay it for too long? It’s not in their interest to delay it for too long. If they delay it longer, they only harm themselves,” Sanjay Kapoor, technology, media and telecom (TMT) adviser said.

Kapoor said he would have expected Vodafone Idea and Bharti Airtel to have increased prices in postpaid alongside prepaid because postpaid base is well fortified and it is not the strength of Reliance Jio. “If Airtel raises prices in postpaid and Vodafone Idea does too, those customers are not going to migrate to anybody because they anyway are at the premium-end of the market and not as sensitive to pricing as they are habituated to paying much higher bills. For them to pay a higher price for brand preference and for better customer experience, I don’t think is a big challenge,” Kapoor, who is a also a former CEO of Bharti Airtel, said.

Analysts feel that a postpaid hike can be expected after a few months.

“The increase is inevitable as India is still the lowest tariff country in the world and with the increase on prepaid, postpaid is likely to follow suit,” Prashant Singhal, emerging markets technology, media & entertainment and telecommunications (TMT) leader, EY, said.

Both Bharti Airtel and Vodafone Idea have indicated their desire to reach an Arpu (average realisation per user) of Rs 300 in coming future to remain sustainable in the market. “The average Arpu of the industry today is around Rs 130. Five years ago in 2016, it was over Rs 200. So, the most important thing is that we first we need to get the Arpu back to Rs 200 and eventually to Rs 300,” Vodafone Idea CEO and managing director Ravinder Takkar had said after the announcement of telecom reforms.

Currently, Vodafone Idea has the lowest Arpu of Rs 109 among telecom firms, while Bharti Airtel leads with an Arpu of Rs 153. Reliance Jio’s Arpu stands at Rs 143.6.

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