India's an interesting market for the telecom space. While there are very few players since the entry of Jio, the structure of tariffs and the consumption from the users and the scale at which telcos operate their business is unlike other countries (except China in scale). Indian telecom operators 5G to the users as an add-on benefit. The true monetisation of 5G hasn't happened yet. Through the lucrative offer of unlimited 5G, telcos push users to recharge with more premium plans. For example, if the user can work with a 1.5GB daily data plan, he/she will still likely pay more and go for a 2GB daily data plan just for getting the 5G benefit. This is because the offer of unlimited 5G is too good to ignore.
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In the short-term, this will help in improving the average revenue per user (ARPU) by small margins. The true growth will come as more users shift from feature phones to smartphones. Their data consumption will rise, and along with that the telcos will get more high-paying customers via the 5G offer.
According to a BofA Securities note, the true 5G monetisation will pick up when the unlimited 5G offer is removed. The telcos aren't charging anything extra for 5G, and are also offering unlimited data. This means that 5G has not been monetised yet in the truest sense via the mobile users. Whether or not the telcos will remove the unlimited 5G data offer will be interesting to see.
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BofA added, "On tariff hikes, management (Bharti Airtel) believes if the industry structure improves, then it’s a great scenario for everyone. If not, then we could see a few more rounds of tariff hikes taking ARPU from Rs 250 to Rs 350. From there, uptake could be more measured."
