Bharti Airtel, India’s second-largest telecom operator, recently implemented the prepaid tariff hike in two circles - Haryana and Odisha. Now, this is old news. What would really matter now is what Jio and Vodafone Idea (Vi) will do. Airtel would require Jio and Vi to push for the tariff hike as well; otherwise, it will have no other option but to roll back the Rs 99 plan it has removed for now from the above-mentioned circles. However, it may be too good an opportunity for Jio and Vi to miss out on. While Jio wants to keep its tariffs lower than everyone else in the industry, the telco definitely needs a tariff hike to boost revenues. Vodafone Idea again would require the tariff hike to boost revenues and average revenue per user (ARPU) figure fast. According to ICICI Securities, this is an offer for the competitors of Airtel that they can’t refuse. Jio can raise its tariffs but still keep it 20% more affordable than what Airtel and Vi are offering. While Vi can delay the tariff hike, it is also worth considering that the telco would want to make more money to be able to sustain operations and promote expansion. The telecom operators in India have been offering services to customers at one of the most affordable rates for a very long time. The telcos would surely look to change that in the coming years as their expenditure on networks and developing new technologies goes up.
Airtel’s Move Might Change the Entire Industry
ICICI Securities, in a note, said, “If the competition follows Bharti in effecting price hikes, the industry will have established a massive pricing power, which has not been seen in the past 10+ years. And this should position India telecom very differently than global telco peers who have slow-growing revenue and depressed (and falling) RoICs.” Bharti Airtel’s move might change the entire scope of the Indian telecom industry and could bring in a better future picture for the struggling Vodafone Idea (Vi). What would be further interesting from here to see is what the telcos will do with the other prepaid plans. If the Rs 99 plan is going and the base plan is Rs 155, it means that Bharti Airtel is getting very aggressive about the tariff hike. It is likely that Jio and Vi would follow in the steps of Airtel. The tariff hikes would help the telcos in boosting their revenues as well as reduce debt from the extra free cash flow they generate because of it.
