When Bharti Airtel Ltd and Vodafone Idea Ltd raised tariffs by upto 50% in early December, analysts had said this can boost their revenues by about 23%. The increase in tariffs was the highest for those using 1GB/day plans, because the new plans announced last week had done away with this category. Upgrading to a 1.5GB/day pack meant a steep tariff increase of about 50%, although telcos seemed to have bet that customers will bite, given the higher data allowance.
A week since, companies are having second thoughts, and concerns about demand elasticity have become a bit louder. So the 1GB/day packs have been re-introduced at a price point that’s about 12% cheaper than the 1.5GB/day pack. “The lower price points are, in our view, a reflection of the wallet size constraints for consumers," analysts at Jefferies India Pvt. Ltd said in a note to clients. A large number of Indian customers use monthly packs, even though effective tariffs are cheaper for three-month plans, on account of wallet size constraints, the broker has pointed out in the past.
The monthly Arpu (average revenue per user) on these plans works out to Rs201.5, which is still far higher than the company-wide Apru for the two companies. But while the plans are, in that sense, Arpu-accretive, their introduction also means that the increase in telco revenues will be lower than what was anticipated last week.
It’s little wonder shares of Vodafone Idea have given up all the gains made in early December, while Bharti Airtel Ltd has given up most of its gains.
Reliance Jio Infocomm Ltd also launched a 1GB/day plan at an effective monthly Arpu of Rs159.9, which is at a 30% discount to peers. As pointed earlier in this column, Jio’s tariffs are far more attractive than competition, which positions it well in terms of gaining market share. In the 1.5GB/day category, Jio’s tariffs are at a 20% discount to peers.