Indian consumers may have to pay more for wireless telecom services in coming months as private telecom operators plan a new wave of tariff hikes to improve their ARPUs and increase profitability as they gear up for 5G rollouts later this year.
Indian telecom operators Reliance Jio, Bharti Airtel and Vodafone Idea are now looking to weed out low-paying and inactive subscribers that don’t add value to their ARPUs, according to a report by the Financial Express newspaper.
The tariff hikes may not happen in the immediate term, as the impact of the last round of hikes is ongoing, the report added. However, telcos are reportedly planning to initiate the next round of tariff hikes after upcoming 5G spectrum auctions.
“If 5G is to become successful in the country, ARPU has to rise further. With the current levels of ARPU, there is no business case for any mobile operators to roll out 5G,” an industry analyst was quoted as saying by the publication.
Indian telcos previously raised prices in December 2021 after losing wireless subscribers on a net basis for the previous two months. Surprisingly, however, despite the hikes, the industry’s active subscriber base has gone up in the last few months, which is giving them confidence to raise tariffs again.
Jio increased its active subscriber base by remove inactive subscribers to an all-time high of 94% by the end of February. According to the report, Jio is currently focusing on further improving the profile of subscribers on its network.
Bharti Airtel was already focusing on maintaining a healthy active subscriber base to ensure high ARPUs. CEO Gopal Vittal has always maintained that Airtel’s ARPU must reach Rs 200 ($2.61) this year with the help of various initiatives, up from Rs 163 ($2.22) at the end of December.
“Tariffs remain abysmally low in India and another round of price hikes will definitely happen in 2022, although it won’t in the next three to four months as the current (wave of) SIM consolidation caused by the last round of hikes needs to come down,” Vittal said earlier this year. “Unless ARPUs settle higher at the Rs 300 ($3.91) level, telcos like Airtel won’t be able to make respectable 15%-plus returns” on capital employed (RoCE).”
Vodafone Idea has also been pushing for the need for tariff hikes, which could allow it to better compete with rival telcos.