Bharti Airtel's CEO, Gopal Vittal, has hinted at a new tariff structure that the telco wants to move towards in the future. Now don't fret over it, as it is not going to happen anytime soon. On top of that, no one player can change the tariff structure as it has to be a collaborative approach from the telcos so that one company doesn't end up losing a major chunk of its customers. Gopal Vittal has hinted at a new tariff structure, wherein people who consume more, would pay more. This is not the first time Airtel's chief has talked about this. On previous occasions also, talking to the media and analysts, Vittal has floated the idea of a structure where people who are consuming more data would end up paying more money.
Higher tariffs would allow the telecom operators to increase their average revenue per user (ARPU) figure. Airtel's ARPU already jumped from Rs 211 in Q1 FY25 to Rs 233 in Q2 FY25, driven by tariff hikes on mobile plans implemented in July 2024. The full effect of the hike is yet to come and it will take around two more quarters, Gopal confirmed.
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Talking about the next round of tariff hikes that would take place, Gopal Vittal said, "All I would say is that this is my favorite subject which is that if you take the two axis and plot the rate per GB and ARPU on two different axis and put all the countries of the world on that graph you will find India at the extreme left on both much lower than Sub Saharan Africa, much lower than Bangladesh, much lower than Indonesia and so on and so forth, so the opportunity to take up tariffs over a period of time is high."
In India, consumers are still paying less than Rs 250 per month to do most of the things in their daily lives, such as consuming entertaining content, doing business online, ordering stuff, and more. Spending about 3-4 hours per day on the phone, and not paying even more than Rs 250 per month is what the telco believes has to change, as the Indian consumer is essentially paying nothing for the scale of consumption he/she has.
Tariff Structure of Mobile Plans has to Change
The ARPU wouldn't go up just by hiking the mobile prices in a linear manner. The tariff structure has to change, believes Airtel.
Gopal said, "Equally I think the architecture of pricing as I mentioned before needs to change where you do have an ability for customers to upgrade from low, medium, high and super high in terms of plans and I think that is the part that also would change and then that will naturally play to our upgrades."
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Bharti Airtel's ARPU Goal
Bharti Airtel wants to reach an ARPU milestone of Rs 300 immediately. This tariff hike would allow the telco to reach close to this figure over time. However, there's a reason why Airtel wants the ARPU to go up. This is how Airtel's CEO, Gopal Vittal laid it out for people to understand.
Gopal said, "Look I think the first protocol is to really get to 300. This round of tariff repair has taken us partly towards that direction, but if you step back and look at it this is a category where people spend five to six hours on their phones and it pretty much runs a very large part of their lives whether it is entertainment, it is shopping, it is commerce, it is studying, it is working and to have the cost of subscription for a whole month being lower than going to a cinema to watch a movie right it seems a little paradoxical given how central this is to people’s lives.
So yes, I think at least if we have to aspire for continued investment in this critical infrastructure this is a heavy capex business we have to aspire for continued investment and really put the best technologies out there, which is what we are committed to doing then yes we will need to certainly be constantly looking at ways and means by which we can take up the ARPU so that the return on capital becomes respectable in this industry so I think that is really how I would frame."
