Bharti Airtel Removes Cheaper Postpaid Plans to Boost ARPU and Profitability

Bharti Airtel has been making back to back moves to increase its ARPU. In late 2018, the telco had introduced minimum recharge plans for the same reason

Highlights
  • The highly priced postpaid plans will mean loss of few subscribers but will also increase ARPU
  • The company will also see increased profitability with this new move

Bharti Airtel made a massive change to its postpaid portfolio in the past few weeks. The Sunil Bharti Mittal led telecom operator has scrapped all the postpaid plans below the Rs 499 price mark and has halved the total number of postpaid plans to only four. As per an ET Telecom report, Bharti Airtel has carried out this step to increase its average revenue per user (ARPU), to lower costs and to boost profitability. Now the entry point for Airtel postpaid subscribers is Rs 499. It is worth noting that postpaid subscribers make up around 5-7% of the total 284 million subscriber base of Airtel but they contribute about 20-25% of revenue. As per the experts, the telco is letting go of some subscribers for higher revenue and increased profitability by an increase in ARPU.

bharti-airtel-cheaper-postpaid-plans

Only 4 Postpaid Plans Remaining in Airtel Portfolio

Among the plans which have been discontinued are the Rs 299, Rs 399, Rs 649, Rs 1,199 and Rs 2,999 plans. Now Bharti Airtel only offers four plans which include the postpaid plans of Rs 499, Rs 749, Rs 999 and Rs 1599. These new plans went into effect on May 1, 2019. A person familiar with the matter also said that that the Rs 349 plan is in use for some of the users in limited circles, but it would be phased out slowly. This is in contrast to other telecom operators since Reliance Jio has only one postpaid plan whereas Vodafone Idea still offers several options to its users.

Telco Focuses on Cutting Costs and Increasing ARPU

Hemant Joshi, partner at consultancy firm Deloitte Haskins and Sells said: “This is all driven by economics and profitability…the postpaid customer is a sticky customer, and it will not move by a few rupees here or there.” Also, Bharat Bhargava, who is a partner for telecom advisory to ET said that telcos realise their best-selling plans and they would want to cut the costs for carrying every product. He remarked, “Everything comes at a cost, and if you want to give better customer experience, you need to cover those costs… This enables telcos to offer better customer experience at a price point which is acceptable to clients and gives some sort of margins. You want to simplify plans for customers.”

Bharti Airtel has been making similar moves since the past few quarters, like introducing minimum recharge plans and doing away with lower postpaid plans to boost its ARPU. The company has slipped into losses ever since the Mukesh Ambani led telco made its entry into the industry in 2016. However, Airtel’s latest attempts to fix the ARPU have been working in its favour in the last two quarters through March – including a likely over 20% sequential jump in the fiscal fourth quarter alone – to around Rs 125 thus closing in the gap with Reliance Jio which has an ARPU of Rs 126.6.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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