Bharti Airtel won’t be the first to hike tariffs, likely to maintain status quo for short-term

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October 29, 2020 7:30 AM

Analysts feel that a tariff hike at this point of time by Bharti and Jio would help Vodafone Idea revive itself.

The services would commence from UK and the Arctic region and subsequently expand.The services would commence from UK and the Arctic region and subsequently expand.

Despite accepting the need for tariffs to increase so that the average revenue per user (Arpu) moves up to the range of Rs 200-300, Bharti Airtel is not going to take a lead on this front at this point of time.

Speaking to analysts in a post-earnings call on Wednesday, the telco’s managing director and CEO (India & South Asia) Gopal Vittal said the company took the lead in increasing tariffs in December 2019 and they are in the premium range now and a hike at this stage may impact its competitiveness. However, if other players take the lead and increases tariffs, Bharti would match them to maintain the premium.

“Pricing is very low compared with the kind of allowances which are offered to the customers…Arpu must go up to Rs 200 and ultimately to Rs 300. The question is about competitive dynamics as these levels of tariffs are not sustainable and somebody has to lead it,” Vittal said.

Bharti, which reported its July-September earnings on Tuesday, saw its Arpu rising to a three-year high at Rs 162 on the back of the last tariff hike, combined with a strong 14 million addition of 4G subscribers, and data usage remaining stable in the high zone of 16 GB per month.

Vittal’s comments on tariffs suggest that Bharti is likely to maintain status quo in the short-term. Analysts have so far maintained that market leader Reliance Jio is also likely to maintain the same stance, which leaves Vodafone Idea to take the lead. However, Vodafone Idea, which has been constantly losing subscribers, faces the risk of losing even more users if it takes the lead and the other two don’t follow suit.

Financially, Bharti Airtel and Jio are well placed and it is Vodafone which needs to shore up its revenue and Arpu to be able to pay its adjusted gross revenue (AGR) dues as well as invest in network upgrade. Analysts feel that a tariff hike at this point of time by Bharti and Jio would help Vodafone Idea revive itself.

On questions about Bharti also doing a Jio by inducting strategic and financial investors to raise funds, Vittal said the company has been working with global technology players and has partnerships with Google, Amazon Web Services, Cisco, etc, but getting capital from a partner is different and Bharti does not need it. He said the company has already raised enough capital recently through a rights issue, etc.

On the right time to conduct 5G auctions, Vittal said the 5G ecosystem was still in a nascent stage and it would take a couple of year for it to evolve. Still, he added that the Telecom Regulatory Authority of India (Trai)-recommended reserve price for 5G spectrum was very high and the company would want it to come down whenever the auctions are held.

Regarding a regulatory intervention on tariffs by way of fixing a floor price, Vittal said a new chairman has assumed charge at the Trai and industry body COAI has already submitted its demand for having a floor price. On Bharti Airtel coming out with a low-cost smartphone, he said the company is studying the space and so far has not decided its approach.

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