NEW DELHI: With eyes on increasing profitability and return on capital, telecom operator Bharti Airtel on Monday decided to hike tariff rates by 20-25% for various prepaid offerings from November 26. The company said the move would provide a reasonable return on capital that allows for a financially healthy business model.
“Bharti Airtel has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at Rs 200 and ultimately at Rs 300, so as to provide a reasonable return on capital that allows for a financially healthy business model,” said Airtel in an official statement.
At the end of September quarter, the company had a monthly ARPU of Rs 153. Sunil Mittal-led Airtel is one of the oldest telecom operators in India, and currently it has 323 million India mobile customers at the last count. This is the first time after a long gap the company has hiked tariffs at this scale.
“We also believe that this level of ARPU will enable the substantial investments required in networks and spectrum. Even more important, this will give Airtel the elbow room to roll out 5G in India. Therefore, as a first step, we are taking the lead in rebalancing our tariffs during the month of November,” reads the statement of Airtel.
After the hike, the current Rs 79 plan will cost Rs 99 from Friday to the customers. Similarly, the Rs 149 plan will cost Rs 179, the Rs 1,498 plan will become Rs 1,799 and the Rs 2,498 plan will cost Rs 2,999. Airtel also increased the tariffs for data top-up plans by about 20-21%. Experts welcomed the move of Airtel, and said other telcos may follow the suit.
“The tariff hike announced by a major telecom operator today is a much-needed step towards healing the profitability and the returns profile of the sector. It will also enable telcos to invest in rolling out 5G mobile services over the medium term,” said Nitesh Jain, Director, CRISIL Ratings.
He called the sector capital-intensive as it requires continuous technological upgradation. “Telcos would need to invest at least ~Rs 70,000 crore at the 5G spectrum auction which is likely in next fiscal. After the tariff hike announcement, the share of telecom operator’s touched a 52-week high of Rs 756, surging over 5% in the early trade. The stock closed 3.8% higher at Rs 741 on Monday.