The Indian telecom sector was shattered with the entry of Reliance Jio. The Mukesh Ambani-led telco ushered a new era by rolling out affordable 4G tariff plans that triggered a war in the industry. Reliance Jio made 4G accessible to everyone which was not the thing before as tariff plans were priced higher- such higher that most of the SIM card holders settled down to 2G plans. And of course, incumbent telcos like Bharti Airtel, Vodafone Idea, BSNL faced the heat with Jio's aggressive strategy. Bharti Airtel has been the leader of the Indian telecom sector since the very start, but Jio made things difficult even for the Sunil Mittal-led telco. To combat Jio, Airtel rolled out aggressive prepaid, postpaid plans, and at the same time, it started heavily investing in 4G expansion across the country. As a result, Airtel's profits dropped slowly and due to low-cost plans, ARPU (Average Revenue per User) shattered. Despite all the efforts it had in place, consumers are leaving the network to join the even more affordable Reliance Jio.
Now this made Airtel's executives go back and look for an alternative strategy. And then came the 'Minimum Recharges' scheme last year which turned tables for the company. Bharti Airtel is now focussing on users who generate revenue for the company and made it clear that the ones who don't want to pay on a monthly basis can leave the network. While this strategy from Airtel resulted in the loss of subscribers, the telco is at least gaining in the business side of things.
Minimum Recharge Plans Helped Bharti Airtel in Increasing ARPU
Back in October 2018, Bharti Airtel introduced 'Minimum Recharge Plans' to boost the ARPU. As part of this strategy, the telco had launched Smart Recharge Plans starting at Rs 23 and they ship with talk time, data benefits along with a certain validity period. Before the introduction of Minimum Recharge plans, Airtel removed the ability to receive incoming calls if a customer has no talk time balance in their account. Earlier, the telco offered lifetime free incoming, but that has changed as you will no more be able to receive incoming calls after a certain period of your plan's expiry.
Airtel started sending notifications to customers regarding their account's incoming calling facility expiry and they were baffled after seeing that. Right after this, Airtel introduced minimum recharge plans and made it clear that it wants to retain the customers who pay every month. So the customers who're just using Airtel mobile number as an incoming calling option will now have to shell out at least Rs 23 (if there's any talk time balance left in the account) every month. There's a Rs 35 Smart Recharge plan which offers 100MB of data and Rs 26.66 talk time with 28 days validity.
Right after the minimum recharge plans implementation, several Airtel customers left the network to join BSNL and Reliance Jio. Airtel' subscriber base dropped drastically and it took almost six months for the telco to add new users on board. At the end of March 2019, Airtel' subscriber base stood at 286.2 million, down from over 340 million users it had at the end of May 2018.
Airtel's ARPU Increased to Rs 123 But Subscriber Base Dipped
Just yesterday, Bharti Airtel released a report revealing its numbers for the quarter that ended on March 31, 2019. To recall, Airtel's ARPU touched a record low of Rs 100 during Q2 FY19. Airtel said its ARPU increased to Rs 104 during Q3 FY19, and now, it's ARPU has been increased to Rs 123 during the last quarter of FY19. This is good news for Airtel despite losing subscribers consistently over the last six months.
On the business side of things, Airtel posted a net profit of Rs 107.2 crore for the fourth quarter of FY19 which is a growth of 29.3% y-o-y.
ARPU of Rs 123 Still Not Sustainable for the Sector Says Airtel
Reliance Jio has a reported an ARPU of Rs 126 at the end of March 2019 and Airtel has now reported ARPU of Rs 123 for the same period. It's evident that Airtel is closing in with Jio in terms of ARPU and it might even pass Jio during Q1 FY20 (because of postpaid users), but Airtel still believes that the current APRU is not at a sustainable level. Revealing Q4 FY19 numbers, Gopal Vittal, MD and CEO, India & South Asia, Bharti Airtel said: “The year has ended on a positive note with 4th quarter ARPU increasing to Rs 123 though still not at sustainable levels for the industry.”
In the past, Gopal Vittal said that Rs 200 would be the ideal sustainable ARPU for the industry. “If you look at the situation before Jio entered the industry, the ARPU was Rs 200 and all we need to do is get back to that. We are not saying India needs to go levels where the world is,” Gopal Vittal said a couple of months ago.
What's Next for Bharti Airtel?
Well, Airtel is going to bank on the same strategy. Recently, Airtel phased out low-end postpaid plans such as Rs 299, Rs 399 and simplified the entire portfolio. Airtel's postpaid plans now start at Rs 499 and they go up to Rs 1,599 with benefits like Netflix, Amazon Prime, Airtel TV Plus membership and so on. The prepaid war seems to be settled as Reliance Jio did not revise its tariff plans for more than 15 months now, and even Airtel now has simplified prepaid tariff portfolio.
The entire focus now shifts to postpaid where Reliance Jio is lagging behind Airtel. Going by the previous reports, Airtel's prepaid subscriber base is around 94% and the postpaid user base is a mere 6%. But with the refined postpaid plans, a basic Airtel postpaid plan user pays Rs 499 (excluding taxes) which surely boosts the ARPU of the company even further. Also, with Tata Teleservices merger in the final leg, Airtel's customer base might get a little boost in the next few weeks and it might go past 300 million again.