Telecom Operators Need More Money Out of Customers, But Why?

There are a lot of talks about operators aiming for a higher average revenue per user (ARPU) in the industry. While there are many who understand the reason, there are many who question what would a higher ARPU change if there are overall profits in the books of the telcos. For example, why should Reliance Jio care about ARPU if it is making thousands of crores in profits? People who think this way would term ‘tariff hikes’ as totally pointless since that would only benefit the companies and increase costs for the customers. But that’s not seeing the larger picture. Here’s what you should know about why telcos are eyeing higher ARPUs.

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Higher ARPUs Helps Telecom Operators to Sustain Profits With Fewer Customers

The thing is, regardless of the number of customers under their belt, the telcos need to make investments in spectrum, equipment, maintenance, pay salaries, pay off statutory dues, and then out of what’s left, distribute amongst the investors. On top of this, there’s a lot of money being spent on advertisements, research and development to come out with more innovative services; and this takes a lot of money.

Subscribers keep on increasing and reducing; while that is uncertain, what can be ensured by the operators is regardless of the kind of subscriber base they have, they are earning more than they are spending.

In India, telecom operators spend a lot of money on their networks and services but still offer data at very cheap rates. Cheap data reduces their earning per customer, which affects their overall profits or losses. Further, looking at low ARPU for the industry, new investors are afraid to jump in the ship because they are afraid of never getting their money back.