Reliance Jio and Bharti Airtel, India's two leading telecom operators are the only telcos who have added subscribers in the past few years. Vodafone Idea (Vi) and Bharat Sanchar Nigam Limited (BSNL) have been losing ground due to inferior network services. JM Financial, in a recent report, said that the delay in short-term tariff hikes is expediting the transition of the Indian telecom market to a duopoly of Jio and Airtel. Vodafone Idea's active subscriber base is close to falling below the 200 million mark, while Jio has more than 400 million active users and Airtel has around 370 million active users.
Without the tariff hike, it will be hard for the telcos to increase their average revenue per user (ARPU) as well as the RoCE (return on capital employed). The next set of tariff hikes is likely to take place after the general elections are over in 2024. To recall, the last time telcos increased the prices in a full-scale manner was 2021. But the telcos have not sat completely quiet in the meantime. Airtel and Jio have increased the pricing of their base prepaid plans to Rs 155 and Rs 149, respectively. Vodafone Idea continues to provide the Rs 99 plan but is reducing its validity from 28 days to 15 days (the change has happened already in many circles.
Read More - Jio Raises $2 Billion Offshore Loans
Telecom Industry ARPU Needs to Reach Rs 270-300 in 3 to 5 Years
In its report, JM Financial said that in the next three to five years, the ARPU of the telecom industry needs to reach Rs 270-300. For the Jan-March 2023 quarter, TRAI (Telecom Regulatory Authority of India) said that the ARPU of the telecom industry stood at Rs 142.32. So it would require a 100% jump to reach the levels of Rs 270-300 in the next three to five years.
Will the telcos hike the tariffs to reach that figure or will they upsell more through the existing services, it's hard to predict. But one thing is for sure, the ARPU will only go up from here. The ARPU levels of Rs 270-300 is important to achieve in the next three to five years if the industry wants to make a pre-tax RoCE of 12-15%.
Read More - Jio and Airtel Continue to Add Subscribers in July 2023: TRAI Data
Vodafone Idea's Funding Would Become Harder
JM Financial said that a delay in short-term tariff hikes would deter VIL's (Vodafone Idea Limited) fundraising plans and push the industry towards a duopoly. Further, it will boost the market share of Airtel and Jio which will help the telcos add more high-paying customers and increase their ARPU.
