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As telcos pursue higher margins, lower-end users could suffer

Bharti Airtel and Vodafone Idea increased mobile tariffs by 11-20 per cent on Friday following Jio’s announcement. While Airtel’s new tariffs will come into effect from July 3, Vi will implement the hike a day later on July 4. Both the operators’ lowest tariff plan increased by 11 per cent, from ₹179 to ₹199 per month.

This rise is lower than Reliance Jio’s increase, as Jio’s initial prices were much lower than Airtel’s. Now, both operators’ entry-level prices are similarly priced.

The blended ARPU for the industry is expected to increase to ₹250 following the hike. According to Nomura, Jio’s ARPU after the hike will be around ₹208, while Airtel’s ARPU will stabilise to be somewhere near ₹280 after the hike, according to brokerage firms.

While India enjoys some of the cheapest telecom plans in the world, an 11-20 per cent hike for entry-level plans is likely going to impact the economic margins. The industry took a 20 per cent hike two years ago, which led to swathes of entry-level subscribers dropping their telecom plans. Jio, which usually offers cheaper entry packs than its competitors has taken a much steeper hike than Airtel indicating a shift in strategy for the operator, which till now was the go-to telco for entry-level subscribers.

Consumer experts have also noted that the tariff hike could potentially impact consumer demand. Reacting to Jio’s hike Abneesh Roy, Head of Research, Nuvama Institutional Equities, had said, “Potentially this is a bit negative for staples companies as consumption at lower end in both Rural and Urban India, could get impacted negatively as wallet share shifts to communication.”

Airtel argues that it is a modest price increase at the entry level of 70 paisa a day.

5G monetisation
Experts believe that tariff hikes were necessary to begin 5G monetisation. Both telcos have not offered plans specifically for 5G. Jio, for instance, has opted to offer 5G on higher data plans. BNP Paribas said, “Consumers will have to pay 46 per cent more to keep using 5G.” The Hindu BusinessLine

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