Vodafone Idea Set to Hike Tariffs, Jio Postpaid Has Limited Traction

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Vodafone Idea

Bharti Airtel, the second-largest wireless operator in India is set to record a 3% increase in revenues in its upcoming quarters, say multiple analysts. The operator on Thursday announced “upgrades” to its retail and corporate postpaid plans to “serve evolving” user needs with the minimum plan for corporate users now priced at Rs 299, up from Rs 199. Similarly, Airtel has also tweaked its retail postpaid plans with the price of its Rs 249 add-on pack increased to Rs 299, translating to a 20% increase.

Entry Level Family Plan Now Up Rs 50

The second-largest wireless operator in India on Thursday also said that its family plan priced at Rs 749 has been “discontinued” for its new users. Airtel in its release highlighted that it now provides Rs 999 as its “only family postpaid plan with enhanced data benefits.”

“Earlier, subscribers could acquire two SIM cards at Rs 749, with the implied value amounting to Rs 325,” Motilal Oswal Financial Services said in a report on Friday. “With the 749 plan now being discontinued, the customer could make a purchase of Rs 499 with an add-on of Rs 299, implying a total value of Rs 800.”

The Indian diversified financial services firm said that the move to discontinue Rs 749 plan would translate to an 7% increase in average revenue per user (ARPU) for Airtel. Similarly, Motilal Oswal highlighted that the corporate postpaid plans now have a 30% increase.

“Assuming [an] average ARPU of Rs 225 for old plans, the hike in this category would be 30%,” Motilal Oswal said.

It also has to be noted that the Rs 999 postpaid plan has also been revised to offer only three regular SIM with the operator earlier offering three regular SIM and one data SIM.

Vodafone Idea’s plans are thus far aligned with Airtel’s old plans,” Motilal Oswal said. “On the other hand, RJIO’s postpaid plans start at Rs 199, but have limited traction. We expect Vodafone Idea to follow suit.”

The firm highlighted that the postpaid segment “contributes” around 5% to the overall Airtel user base and around 12% to its revenues. Crucially, it was highlighted that the segment is equally split between retail and corporate users.

Motilal Oswal said that the average ARPU may now touch Rs 400, translating to an 20% to 25% increase as compared to the overall Airtel ARPU of Rs 145 in its previous quarter. The firm said that the retail postpaid segment of the operator “may see a lower increase” of 15% to 20% while its corporate segment “may see a moderately higher” 30% increase.

Further, Motilal Oswal said that the overall increase in Airtel’s earnings before interest, taxes, depreciation and amortization (EBITDA) “could be to the tune” of around 3% with the 20% to 25% postpaid tariff hike. Crucially, the firm said that the benefit is “based on the assumptions” that similar tariff hikes would also be “announced” by its rivals, translating to “limited’ postpaid users porting out or switching to prepaid.

Similar sentiments were also shared by ICICI Direct in a report on Friday with the firm highlighting that the tariff hikes will translate to a 3% EBITDA increase. The retail broker and financial product distributor highlighted that Airtel has around 1.66 crore, postpaid users.

“More importantly, we see it as directionally the small step in the right direction of the overall tariff hike,” ICICI Direct said in its report.

Telecom Tariffs Low in India: Airtel CEO

It has to be noted that the Airtel management in the past has consistently said that the ARPU has to touch Rs 200 in the near term. Gopal Vittal, chief executive officer at Bharti Airtel in the 2021 fourth-quarter earnings call said that the operator has a “massive headroom for ARPU growth” despite Airtel ARPU being “highest in the industry.”

“I say this for two reasons. One is the very low level of tariffs in India,” Vittal said in the 2021 fourth-quarter earnings call. “The second is the fact that we have 140 million users on our network who are not on 4G and whose ARPU is less than half that of the average of the business as a whole.”

In early July, Airtel revised its One Airtel plans as Airtel Black, with the Airtel management indicating that the plans will drive its ARPU. The Airtel Black service enables users to “combine” two or more services including mobile, Direct-to-Home (DTH) and Fiber into one plan. The operator has priced its Airtel Black plans between Rs 998 to Rs 2099.

“At some stage, the pricing has to improve because this is the only way in which you can return a reasonable return on the capital employed,” Vittal said in the 2021 fourth-quarter earnings call.

Reported By


Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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