After favourable market share movements in Haryana and Odisha , where Bharti Airtel (Airtel) had discontinued its ₹99 plan in November, the company has extended this move to 19 circles recently contributing to over 90 per cent of its India mobile revenues and this move will add to around 2 per cent to Airtel’s revenues by 1QFY24, said analysts on Friday.
More importantly, this indicates that Airtel is looking to boost average revenue per user (ARPUs) even if it leads to some churn among low-ARPU subscribers, said Jefferies and CLSA reports accessed by bu sinessLine.
Bharti has seen an acceleration in market share gains among active 4G users, evident from its 60 per cent incremental market share in second half of calendar year 2022 (2HCY22) vs its overall market share of 30 per cent, they said.
“This has helped Bharti Airtel improved its subscriber mix and raise its daily ARPU by 4.4 per cent over 2HCY22. With another 107 million voice subscribers on its network yet to upgrade to data, Bharti’s ARPUs will likely rise by 4-5 per cent annually due to the improvement in subscriber mix,” said the equity research firm Jefferies in its report.
On tariff outlook, it said that the government’s recent decision to convert a portion of Vodafone-Idea’s (VIL’s) debt to equity, is likely to align its interests in favour of a tariff hike. Moreover, this is also likely to shift Airtel/ Reliance Jio’s (Rjio) focus away from market share gains towards market expansion.
“While the pace of tariff hikes has disappointed recently, government’s recent move could drive positive surprises. Over FY23-25, we now expect a single tariff hike of 15 per cent towards end-CY23 resulting in 1-3 per cent cuts to our FY23-25 ARPU estimates,” Jefferies added in its report.
According to CLSA, the current tariff increase by Airtel has a comparable pattern with the 2021 hikes, which started with a 61 per cent increase in July for entry level plans and was followed by a 20 per cent hike for prepaid data tariffs in November.
“These hikes boosted ARPU by 26 per cent to Rs.193. Encouragingly during this period, Bharti gained 24 million 4G data subscribers, significantly more than Vodafone Idea and Reliance Jio (3-5 million additions). VIL and Jio followed Bharti’s tariff hikes, but besides muted subs growth, ARPU for the peers increased by a more modest 24 per cent to Rs.153/ Rs.178 despite VIL’s and Rjio reporting ARPU including enterprise and home broadband revenues,”it said.
Sunil Mittal, Chairman, Bharti Airtel recently has also indicated of more tariff hikes by mid-2023 saying the return on capital of this industry is very low, which needs to change and small increments are needed to come in the Indian tariff situation.
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