Gopal Vittal expects next tariff hike to take ARPU to Rs 200

Bharti Airtel India and South Asia MD and CEO Gopal Vittal on Wednesday said that the 35% cut in the reserve price of 5G spectrum is not adequate and ‘quite disappointing’. However, he did not comment on the company’s strategy for the upcoming auctions.

“While there has been a reduction, it’s not adequate and in that sense quite disappointing. We will not comment on our strategy and approach since it’s dependent on the final reserve price finalised by the government,” Vittal said during an analysts’ call after the company’s January-March earnings, which were declared on Tuesday.

Regarding tariff hikes, Vittal said one more increase is required to reach the company’s stated target of Rs 200 average revenue per user (ARPU) this year. Vittal reiterated that tariffs at the current level are still very, very low. “I think we’ve been consistent in saying that we need to reach Rs 200. This will require at least one more round of tariff increase, because the gap between where we are and Rs 200 is about Rs 22. Even though you may see some ARPU increases with the natural upgrade and growth of postpaid that we see in our business, that’s not going to be adequate to cover that bridge in the shorter term. So, I think one round of tariff increase will take us into the Rs 200 area, and then getting into Rs 300 will be over a period of time,” he said.

The company’s ARPU saw a jump of 9.2% quarter-on-quarter at Rs 178 compared with Rs 163 in the preceding quarter. Airtel’s ARPU continues to be the best in the industry, remaining ahead of Reliance Jio’s Rs 167.6. Growth in ARPU was on the back of tariff hikes and continued momentum in 4G customer additions. The company saw the full impact of December tariff hikes during the quarter. Over the past few quarters, Airtel has done several tariff hikes to improve its ARPU.

The company, though, is seeing some softness in 4G upgrades due to rising smartphone prices because of semiconductor shortage. Vittal said due to chip shortage, some device makers have put greater focus on higher priced smartphones. “So, the entry-level smartphones, which used to start at about Rs 6,000 to Rs 7,000 are now a little over, it is almost Rs 10,000. That has led to some softness in upgrade, from 2G to 4G across the industry. I believe this is a temporary phenomenon, and the reason is that people tend to get used to a new normal. I think the initial shock is likely to wear off in the next few months,” he said.

Further, he highlighted about the headwinds in terms of inflation or commodity prices, and energy prices. “And all of that obviously takes a toll on consumers’ wallets. Let’s see how this plays out. The fact is that consumers understand the value that a smartphone plays in their lives. This is one of the few aspirational categories where upgrade is a big deal,” he added. Financial Express