All three of India’s leading telecom operators, Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) have announced tariff hikes within hours of each other, as the companies search for a path of monetising 5G services and improving the financial health of the sector.

Jio has raised tariffs by 12-25 per cent, with the steepest hike coming in some of its more premium plans. Airtel has increased prices by 11-21 per cent. Vi has raised also prices by 10-20 per cent.

ARPU – What it is and why it is important

Average revenue per unit (ARPU) is an indicator of the profitability of a product based on the amount of money that is generated from each of its users or subscribers. It is a particularly useful measurement for companies in the telecommunications and media industries, which rely on subscribers or users.

It is important because:

• The ARPU of a business helps to track and assess the financial performance over time.
• ARPU can be used to segment customers based on their spending habits or usage, such as identifying high-value customers, target marketing efforts, and developing services for a specific user.
• Telecom companies can use ARPU to compare their performance against its competitors.
• An analysis of the ARPU can inform a company about its pricing strategy, which further helps to highlight areas for potential price adjustments or changes in product offerings to increase revenue.

In the quarter ended March 2023, Airtel’s ARPU stood at Rs 209. Jio’s ARPU for the quarter was Rs 181.70 and VI’s at Rs 146. It is estimated that for Airtel, its ARPU should stabilise to Rs 280 by FY26 and at Rs 300 by FY27. According to Antique Stock Broking, the upcoming tariff hike will increase Airtel’s ARPU by Rs 55, and 2G to 4G migration will contribute another Rs 10, and customer upgradation to higher data plan as well as prepaid to postpaid conversion will contribute about Rs 14 to Airtel’s ARPU.

5G rollout and monetisation

The rollout of fifth-generation or 5G mobile networks rapidly accelerated in India in the last four months, according to a senior executive of GSMA. Both Jio and Airtel have completed pan-India rollout for 5G networks while VI has yet to launch it. Vi, though, recently said that it has completed the minimum rollout obligation (MRO) for 5G in four circles with four vendors.

Telcos are looking to premiumise 5G access by increasing the threshold for unlimited 5G data to 2GB/day plans from 1.5GB/day plans that effectively drives a 46 per cent increase in tariffs for 5G users, 2x the overall hikes driving 5G monetisation.

The way forward

The price hike will underscore the sector’s transition from a focus on market share acquisition to sustained monetization, analysts said, coming as operators near the completion of their 5G coverage rollouts. Indian telecom operators spent more than $20 billion in buying 5G airwaves alone and are now looking to recoup their investments.

However, most telcos are struggling to find usecases than deliver in terms of enhancing efficiency and productivity through the adoption of diverse solutions across multiple industries. And for the consumer segment, the sole use case that has emerged in 5G is the high data speed. Although the potential is huge for various use cases such as IoT, smart cities and Industry 4.0, identifying and scaling use cases in collaboration with ecosystem partners that drive revenue generation is crucial for operators to monetize their 5G investments effectively.

Read Further:

• ARPU – In Depth