Airtel hikes rates by up to 25%, Jio, Voda Idea may follow suit
Airtel increased the entry-level voice tariff plan by about 25% to ₹99, while for unlimited voice bundles, the increase in most cases is about 20%
PremiumMUMBAI : Bharti Airtel Ltd on Monday raised prepaid mobile tariffs by as much as 25%, lifting investor sentiment hurt by a bruising price war with Reliance Jio Infocomm Ltd and Vodafone Idea Ltd.
Airtel increased the entry-level voice tariff plan by about 25% to ₹99, while for unlimited voice bundles, the increase in most cases is about 20%. The company has about 322 million domestic mobile users and raised tariffs for top-up data plans by 20-21%.
The new rates will come into effect from 26 November, according to the company.
Airtel said higher tariffs will help boost its mobile average revenue per user (Arpu), a key yardstick to measure profitability of mobile telcos, to “ ₹200 and ultimately at ₹300 so as to provide a reasonable return on capital that allows for a financially healthy business model."
Shares of Airtel rose on investor hopes that the tariff hike will help strengthen the company’s financials, and it will be able to raise funds needed for investments in telecom networks and spectrum, especially to roll out 5G services. The stock hit a new 52-week high of ₹756 before closing 3.9% higher to ₹742.05 apiece on the BSE, widely outperforming a nearly 2% decline in the benchmark index.
Analysts said Airtel’s step is an indication that the five-year-long tariff war initiated by Jio’s entry into the sector in 2016 may finally be coming to an end with Aditya Birla Group’s Vodafone Idea and Jio also planning to raise tariffs.
Two people familiar with Vodafone Idea and Jio’s plans confirmed the development.
“This was long due. In line with the top management’s internal discussions, the headline tariffs may be increased now to keep the business viable. Let alone funding growth in the 5G space; it is tough to even survive without a tariff hike," one of the two people said, requesting anonymity.
“The new tariffs may be announced in 4-6 weeks and will be effective from January. The first set of hikes may be meant for prepaid customers as postpaid business consists of long-term subscribers and generates more revenue. So, any possible churning due to tariff hike should be avoidable in the postpaid segment," the person said.
A spokesperson for Aditya Birla Group declined to comment. A spokesperson for Reliance Jio did not respond to queries.
Vodafone Idea will benefit the most from a tariff hike. The debt-laden firm may find it easier to raise the $2-3 billion worth of funds it needs. Vodafone Idea incurred a consolidated loss of about ₹7,023 crore in the quarter to March.
Considering the liquidity situation of Vodafone Idea, we think it is highly likely they will follow suit. This would also help in its fundraising process. If Jio follows suit, this is a significant positive for the sector as it gives a near-term boost to Arpus," UBS Global Research said in a report.
The brokerage expects Arpus to increase 10% annually over FY22-24.
PTI contributed to the story.
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