Will Airtel’s gamble in the prepaid mobile market pay off?, Telecom News, ET Telecom

Will Airtel’s gamble in the prepaid mobile market pay off?, Telecom News, ET Telecom

Telecom Diary: Will Airtel's gamble in the prepaid mobile market pay off?With a watch on high quality customers, telecom participant Airtel has risked a lack of its subscribers by considerably enhancing minimal recharge plans for prepaid customers in two telecom markets.

India has greater than 1 billion mobile customers, however round 350 million subscribers are nonetheless legacy subscribers ie 2G with entry to voice and messaging solely providers and contribute lower than Rs 50 to the common income per person (ARPU). Plus one other 30 million 2G and 3G knowledge subscribers who additionally contribute insignificantly to ARPU.

Prepaid customers represent 90% of the whole mobile subscribers of telecom operators and have at all times loved numerous benefits as gamers need to retain them in such a aggressive market.

Airtel’s transfer to extend tariffs by as a lot as 57 % got here throughout as a daring and shocking transfer as market specialists had anticipated a minimal tariff improve in minimal recharge plans that are primarily for 2G customers.

The transfer is in line with the plan to restrict legacy and 2G/3G bundle choices and focus extra on providing 4G/5G bundles that may drive a mass improve wave.

However, the technique of elevating baseline charges might backfire. The churn price might go even greater and new mobile additions might lower and the final income impression could also be a lot much less if the technique is utilized in India.

The rollout price of 5G together with spectrum price has put telecom gamers in a dock and to not point out the growth price of 4G community. There was speak of a rise in mobile tariffs, which was final undertaken in November 2021, to enhance the monetary well being of the trade which finally permits for a rise in income.

The common mobile knowledge costs in India, which is the quickest rising mobile market in the world, is round $0.3 per GB which remains to be certainly one of the lowest globally with the least expensive knowledge plan costing simply $0.1 per GB. This provides telecom gamers sufficient scope for a tariff revision. Moreover, the whole price of 5G deployment in India might be the highest to $75 billion amongst 15 rising nations between 2020-35, in response to a modern report.

An Airtel government stated India’s second largest telecom firm is testing the waters. “We’ll see how it goes. If competition responds, we will be called upon to expand, otherwise we can always go in a different direction.”

Tariffs have been the talk of the town lately with Airtel CEO Gopal Vittal mentioning that operating ARPUs are not sustainable and need to improve to Rs 200 in the near term and Rs 300 in the long term. Vi CEO Akshaya Moondra also echoed similar views, saying, “… ahead.”

However, analysts say that the impact on revenue could be much smaller if it becomes the base plan for India, as the sales rates could also rise due to possible SIM consolidation limiting the benefit on revenue.

It’s a risky proposition and a lot will also depend on competition – if Reliance Jio and Vodafone Idea follow suit and improve prepaid rates. Let’s wait and see if Airtel’s bold move will yield expected results.

Airtel, Vi and Jio’s monthly customer churn – or percentage of users leaving the network – rose to 3.3%, 4.3%, respectively, from 2.2%, 2% and 0.46% in the June quarter, FY21 % and 2% in the September quarter, FY23, in the wake of rate hikes taken a year back.

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