Airtel’s unlimited calling plan will result in 1.3-1.5%-accretive to revenues

Bharti Airtel has scrapped the minimum recharge plan of Rs 99 in all 22 circles, and replaced it with an entry-level plan of Rs 155, a report by Morgan Stanley said on Monday. The company has been the first mover in taking entry-level tariffs higher, while competition has not yet reacted, it noted.

The Rs 99 segment accounted for 7-8 per cent of Airtel’s overall mobile revenue. The Rs 99 plan offered 200-megabyte data and calls at the rate of Rs 2.5 paise per second. This has now been replaced nationwide with an unlimited calling plan, a move that has been long planned, given that almost all user categories now expect unlimited calling.

This 57 per cent increase in Airtel’s entry-level plan began in October and November, last year, when the company discontinued the minimum recharge plans in the Haryana and Odisha circles. This was repeated in January in seven more circles–Andhra Pradesh, Bihar, Himachal Pradesh, Karnataka, Northeast, Rajasthan, and Uttar Pradesh (West).

Checks by Morgan Stanley have revealed the last three circles – Gujarat, Kolkata and Madhya Pradesh – have now seen the change. “As we had indicated, we expect this to be 1.3-1.5 per cent-accretive to the revenues of Bharti’s India mobile business, all else equal, once rolled out on a pan-India basis,” Morgan Stanley said in its latest report.

“The key triggers for the stock would be potential 4G tariff hikes (assumed in 2024 in our base case) and accelerated market share gains after a meaningful rollout of the 5G network,” it added.

Eyes on ARPU
The move is part of Airtel’s efforts to raise its average revenue per user (ARPU), which began in 2021 when the company last hiked tariffs before the introduction of 5G. Airtel’s revenue growth initially got a leg-up after a 20 per cent tariff hike in November 2021, but its recent focus on cornering the 5G market has increased the need for faster business growth.

As of Q3FY23, the company’s ARPU has seen growth for six straight quarters. That quarter, India revenue from mobile services grew 21 per cent YoY, led by sustained 4G customer addition.

With 107 million voice subscribers in the company’s network yet to upgrade to data, Airtel’s ARPU will likely rise by 4-5 per cent a year, Jefferies had pointed out in a report last week.

Airtel had the second largest subscriber base of 367.6 million customers nationwide, behind Reliance Jio’s 424.5 million, as of December 31, 2022, according to the latest telecom subscription data by the Telecom Regulatory Authority of India. Business Standard