After Prepaid Hikes, Airtel, Vi Might Go for 4G Postpaid Hikes

According to multiple reports, after last month's 4G prepaid tariff hikes, the telcos might go for 4G postpaid hikes as well.

4G Postpaid Hikes - Pushing for a better ARPU

It seems that Bharti Airtel and Vodafone Idea will benefit the most from a 4G postpaid hike in prices. Airtel and Vi have a significant presence in postpaid - both of them have over 50 million postpaid users among themselves. However, Bharti Airtel had increased postpaid tariffs in July, and Vodafone Idea had tweaked its postpaid plans. Therefore, it might prove tricky to hike prices again. But there's a catch; for most postpaid users, price is not a priority, and therefore, the telcos might get away with a price hike.

According to a report by Jefferies, Vodafone Idea has about 43% of the postpaid market share. Bharti Airtel, on the other hand, has about 28%, and the rest belongs with other telcos. Although the market is worth around Rs. 22,000 crores, the revenue only accounts for about 5% of active subscribers.

Another factor that plays in favor of Airtel is its ability to manage churn. Historically, or for at least the last 5 years, it has had more expensive plans. Mostly, a postpaid user expects service delivery, and the price always takes the back seat, presenting an excellent monetization opportunity. That point is also helped by the fact that more than half of Airtel's postpaid users are corporates. However, Bharti's postpaid users only account for about 16% of its India mobile revenue. Therefore, it needs to increase tariffs, which has hardly been its focus in postpaid.

Lastly, postpaid remains the only segment where Jio has not solidified its presence, yet. As such, if the telcos want to increase postpaid tariffs, they will have to do that soon. They have reasons to wait a bit; customer loyalty is higher in postpaid. However, apart from that, there are no reasons to wait for 4G postpaid hikes.

The Cheapest Mobile Connectivity in the World

Prashant Singhal, Leader, Emerging Markets Technology, Media & Entertainment, and Telecommunications (TMT), EY, said, "the increase is unavoidable because India remains the world’s lowest tariff country, and with the prepaid increase, postpaid is likely to follow suit".

There is no point in taking pride in being the cheapest telecom market in the world when the telcos have constantly struggled financially, which in turn results in poor service quality.

To that, both Bharti and Vi have expressed their intent to take their ARPU to Rs. 300. Since the advent of 4G, the ARPU has only gone down; it was over Rs. 200 on average in 2016, and right now, the average remains at around Rs. 135.2. Bharti Airtel has the highest ARPU in the segment, at Rs. 153. Reliance Jio takes a close second at Rs. 143.6, while Vodafone Idea remains a distant third at Rs. 109. However, all three of the telcos registered an increase in their ARPUs during the second quarter.