With the prospect of a near-term headline tariff hike receding, Bharti Airtel‘s strategy to lift average revenue per user (Arpu) will have to centre on internal levers rather than pricing action, and the company will have to focus on upgrading feature phone users to 4G and nudging prepaid customers towards higher-value postpaid plans.
Bharti Enterprises chairman Sunil Mittal last week reiterated in Davos the industry’s need for higher tariffs, flagging Rs 300 as a desirable Arpu level for the sector. However, analysts and industry executives say that in the absence of a coordinated price increase led by the market leader, Airtel’s ability to reach that level will depend largely on customer mix improvements rather than headline tariff moves.
Airtel’s Arpu
Airtel’s Arpu has risen steadily over the past two years, supported by earlier tariff hikes, a growing postpaid base and higher data consumption. But recent trends suggest that further expansion will be incremental unless pricing across the industry moves higher.
The last meaningful jump in Arpu came after the tariff hikes implemented in July 2024. Since then, sequential growth has been modest.
The constraint is largely structural. Reliance Jio has indicated that it does not see the need for an immediate tariff increase. As a result, industry-wide price resets are unlikely, thus limiting the scope for sharp Arpu expansion.
In this environment, Airtel will have to continue to lean on two levers it has been steadily building over the past few years — upgrading feature phone users to smartphones and driving migration from prepaid to postpaid plans.
Sizable base of 2G customers
Airtel continues to have a sizable base of 2G customers, many of whom are being targeted for migration to 4G and network expansion in rural and semi-urban markets. These users, once upgraded, typically deliver higher data consumption and better realisations.
At the same time, the company has been steadily expanding its postpaid base, which offers higher and more predictable revenue compared with prepaid subscribers. Postpaid users also tend to consume more data and are less price-sensitive, improving overall Arpu stability.
The strategy has shown results. Airtel’s mobile Arpu stood at Rs 256 at the end of the September quarter, up steadily over the past several quarters. Its Homes business, which includes broadband and fixed wireless access, continues to report significantly higher Arpu levels, providing additional support to blended revenue metrics.
However, the broader industry arithmetic remains challenging. Including state-run BSNL, industry Arpu stands below Rs 190, while even among private operators it remains closer to Rs 215. This leaves a wide gap to the Rs 300 level flagged by industry leaders.
Analysts note that while Airtel is better positioned than peers due to its premium customer mix and stronger postpaid base, meaningful Arpu expansion will remain gradual unless tariffs are reset across the board.
For now, the path to higher revenues appears to rest less on price increases and more on customer upgrades, service mix improvement and deeper penetration of higher-value users, a strategy that can lift earnings steadily, but not deliver sharp jumps in the absence of sector-wide tariff action.