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Business News/ Companies / People/  Tariffs 'absurdly low', need substantial repair: Airtel's Gopal Vittal

Tariffs 'absurdly low', need substantial repair: Airtel's Gopal Vittal

He said that multiple rounds of tariff hikes would be needed for average revenue per user, or ARPU, to reach ₹300 from the current ₹200. An ARPU of ₹300 would still be among the lowest globally, he emphasized.

Gopal Vittal, MD & CEO, Airtel Premium
Gopal Vittal, MD & CEO, Airtel

Bharti Airtel's managing director and chief executive Gopal Vittal on Wednesday raised the pitch for tariff hikes, stating that 'substantial tariff repair' was needed across the industry as the current level of tariffs was 'absurdly low'.

He said that multiple rounds of tariff hikes would be needed for average revenue per user, or ARPU, to reach 300 from the current 200. An ARPU of 300 would still be among the lowest globally, he emphasized.

Industry need

“Tariff repair will need to happen across the industry. We could start it but if competition doesn't follow, it will hurt us, and that's a challenge. My own sense is that you will need substantial repairs in industry. The right level of ARPU, even 300, we'll still be one of the lowest in the world," Vittal said.

Also read |  Airtel’s Q4 profit dragged down 31% on forex losses

“It will not go in one shot from 200 to 300, but it will take a couple of rounds to actually get there," he said during the earnings call following the Q4FY24 results, where the telco posted a 31% drop in profits, hurt by its Africa business. Airtel’s ARPU rose 209 in the quarter ended March 2024, the highest amongst peers.

Vittal said the capex for this financial year would fall, after having peaked in FY24, when the country's second-largest telecom operator rolled out its pan-India 5G network. He said that all future investments towards networks will be channeled towards 5G, even though monetization was nowhere in sight.

Behind 5G

“All of the capacity investments are going behind 5G. We've stopped investing on any capacity investments on 4G, and therefore the return that the industry really needs is predicated on tariff repair. This is really the heart of the problem. Our pricing and tariffs are at an absurdly low level, relative to any other part of the world. So tariff repair is sorely needed for return ratios to improve," the top executive said. 

Also read |  Airtel ties up with Google Cloud to offer cloud and gen-AI solutions to Indian businesses

Telcos are currently offering 5G services at 4G tariffs, which is leading to far higher data usage but consumers are not paying more for the higher amounts of data they use, a model that was not prevalent in Asian markets, and hence required intervention to monetize 5G, Vittal said.

Broken architecture

“The architecture of pricing in India is quite broken because people who can afford to pay a lot more are paying a lot less simply because of these unlimited plans, which are like effectively a one-size-fits-all plan. If you look at markets like Indonesia or Thailand or any of the markets in Asia, you'll find small, medium, large, extra large, and there's a pathway to monetization. That unfortunately is not the case in India, but this is not something that we can do alone. This needs to be something that we would be happy to follow if this happens," he added.

Also read |  Chinese stuff at Indian telcos: An old chapter reopens

Telcos last raised headline tariffs by around 20% in November 2021, after a similar hike in December 2019. They’ve raised the entry level tariffs, which led to SIM consolidation over the past year or so. Brokerages and sector analysts expect the next round of tariff hikes to take place after the general elections, which could be in the range of 20-25%.

“While India capex remains elevated at 30% of revenues (due to elevated 5G roll-outs), Bharti generated US$2 bn plus of FCF (free cash flow) in FY24; with our expectation of a decline in capex intensity in FY25 and a potential tariff hike, we see room for meaningful improvement in Bharti’s FCF profile," analysts at Goldman Sachs said in a report following the results.

‘Glad’ tidings

Vittal said he was 'glad' that Vodafone Idea had raised funds, emphasizing that a three-player market was needed for India.

“I am glad to see that Vodafone Idea has raised money, and I really wish them well. I think India will be well served if it has three operators," he said.

Vodafone Idea recently raised 18,000 crore from an FPO that is so far the largest in India. The funding is crucial factor for it to become competitive in the Indian market and start delivering 5G services while scaling up 4G.

Also read |  Don't want an AI gap: GSMA CTO

On competition, Vittal said that the company was pushing hard every day as an ongoing effort. “It's always been a brutally competitive marketplace, ever since I've been around and ever since the company has been around. But you just need to be at the top of your game in terms of execution, for you to continue to deliver sustained performance," he said.

Vittal said that Airtel will add 25,000 new mobile sites in the coming quarters to improve its network coverage. He added that Airtel would deploy 5G standalone architecture for fixed-wireless access, or FWA services, across 25 cities where pilots of FWA were being conducted.

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Gulveen Aulakh
Gulveen covers both corporate and economy, and policy sections of Mint. She also covers telecom, IT from the corporate side and disinvestment, finance ministry from the economy side. Gulveen finds the rare mix of sectors she covers to be incredibly interesting.
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Published: 15 May 2024, 07:52 PM IST
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