4G Tariff Hikes to Boost ARPU, 5G Tariffs an Insignificant Play

There are no special tariffs for 5G in India right now. Both Airtel and Jio are allowing their customers to experience 5G at no additional cost. This is partly because wide coverage hasn't been achieved with 5G yet. Once that is done, we may see different tariffs for 5G and 4G.

Highlights

  • While the tariff hikes sound bad to consumers, for telcos and their investors, it is a boost to the business.
  • Mobile tariffs in India have been very affordable for consumers compared to what users in other nations have to pay for each GB of data and voice calling services.
  • The last time 4G tariffs were bumped in late 2021, prepaid plans were made around 20-25% more expensive.

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While the tariff hikes sound bad to consumers, for telcos and their investors, it is a boost to the business. Mobile tariffs in India have been very affordable for consumers compared to what users in other nations have to pay for each GB of data and voice calling services. The last time 4G tariffs were bumped in late 2021, prepaid plans were made around 20-25% more expensive. In December 2019, a scale of 50-60% tariff hike was implemented. Compounded, over the last three years, mobile services are now almost double the cost of what users paid before December 2019. Now another tariff hike is just around the corner. This time as well, it's the prepaid segment that's likely to be made expensive. Telcos have largely avoided playing around with the pricing of the postpaid plans.

It's hard to assume just how big is the next tariff hike going to be. But what's for sure is that this won't be the last of it, and all the telcos will likely be onboard. Tariff hikes would enable the operators to boost their average revenue per user (APRU) figure.

Will 5G Tariffs Make a Difference?

There are no special tariffs for 5G in India right now. Both Airtel and Jio are allowing their customers to experience 5G at no additional cost. This is partly because wide coverage hasn't been achieved with 5G yet. Once that is done, we may see different tariffs for 5G and 4G.

But 5G tariffs are likely not going to be a difference maker when it comes to overall revenues from mobile services. 4G is what most consumers are going to stick with. Ericsson Mobility Report suggests that 4G will reach peak subscription numbers in India in 2024. Thus, while 5G is rolling out, 4G is still going to be the go-to option for consumers. It is because 5G is just good for speed tests right now for consumers. There are no significant use cases of 5G for consumers yet.

Thus, offering 5G at a premium won't make sense as the uptake would be low. A senior executive at one of the leading telecom companies in India said that with 5G at a premium to 4G, the uptake of 5G wouldn't be great, and thus it wouldn't make any major impact on the overall revenues. Thus, 4G is where the heart of the revenues for telecom operators is currently. It is only 4G that will keep boosting the APRU of the telcos.

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