Jio-Google budget phone to play spoilsport for Airtel’s tariff hikes2 min read . Updated: 25 Aug 2020, 09:57 PM IST
- The current trend of consuming 16GB of data a month for ₹160 is a tragedy, said Sunil Mittal
- But the main hurdle for Airtel to impose hikes is getting the industry leader Jio to agree to the plan
Bharti Airtel Ltd’s chairman Sunil Bharti Mittal, on Monday, hinted at an increase in mobile tariffs in the next six months. The current trend of consuming 16GB of data a month for ₹160 is a tragedy, he said, adding that customers should be either prepared to consume a tenth of this data at the current price points or be willing to pay a lot more for higher usage.
While it’s true that current tariffs are unusually low, Airtel faces a number of hurdles in its tariff hike plans. To start with, loss of incomes due to the coronavirus pandemic has already resulted in SIM consolidation and customers cutting back on recharges.
A tariff hike in this backdrop may look odd, and it remains to be seen if the government will be as supportive of a tariff hike as it was last year.
But the main hurdle for Airtel to cross is getting industry leader Reliance Jio Infocomm Ltd to agree on a tariff hike. For the past four years, since its launch, Jio has by and large determined the broad tariff structure for the entire industry. Last December’s tariff hikes of roughly 25% were possible only after Jio agreed to play ball.
The moot question, therefore, is if it agrees to another hike. It is also important to note that Jio has a new partnership with technology giant Google Inc. to launch an affordable smartphone.
“It will look a bit incongruent for the company to launch an affordable phone on one hand and raise tariffs on the other," says an analyst at a domestic institutional brokerage firm requesting anonymity.
While it can be argued that the affordable smartphone segment may use a differentiated tariff strategy, there is always a risk of customers downtrading. The best hope for Airtel, then, is to somehow squeeze in a tariff hike before the launch of Jio’s affordable phone.
Much also depends on the final outcome of the Supreme Court ruling in the AGR (adjusted gross revenue) dues case. If, as a result of an unwieldy penalty, Vodafone Idea Ltd ends up in bankruptcy, both Airtel and Jio will get a large share of its customers. As such, they will get a boost in revenues and the need for an immediate tariff hike will not be as much.
“We need a ₹300 Arpu in which you will still have lower end at ₹100 a month with decent amount of data," Mittal said at an event on Monday. Airtel’s current Arpu (average revenue per user) stands at ₹157, which means the target is for Arpu to nearly double from current levels. For the amount of data Indians are consuming, an increase in tariffs makes logical sense; but what primarily stands between Airtel and its hopes of higher tariffs is Jio’s strategy to grow the number of data users in the country, and enhance data consumption among existing users. To accomplish these goals, Jio prefers tariffs to remain low.