Data stickiness may see users absorb mobile tariff hike
Industry Arpu may breach ~200 mark in FY25
Consumers are unlikely to disconnect their mobile connections and will most likely absorb the up to 22 per cent tariff hike imposed last week by Jio, Airtel, and Vodafone Idea (Vi), according to analysts.
The last major tariff hike in 2021 was followed by a 4-5 per cent SIM consolidation, with people leaving mobile operators with more expensive plans for their peers offering comparatively affordable options. But, the churn will be lower this time as most of the market is already consolidated, investment banking firm JP Morgan said in a note. On Friday, Bharti Airtel and Vodafone Idea (Vi) increased mobile tariffs by up to 21 per cent, just a day after market leader Reliance Jio implemented an across-the-board tariff hike of 20-25 per cent. This has narrowed Jio’s discount to its competitor to 15 per cent from earlier 20 per cent.
Brokerage house Axis Capital echoed the sentiment, arguing the quantum of hike was manageable for both urban and rural users, especially as data usage was sticky. “While we have taken Bharti (Airtel) as the base case, even Jio’s higher increase in tariffs and 5G monetisation are unlikely to have much impact on household expenditure,” it said in a research note.
Axis said the tariff hike would lead to an additional inflow of ~45,600 crore in the next 12 months, but the impact on overall inflation would be low.
All three telecom firms would face lower downgrading risks as a result, Bank of America said. Vi, however, remains most vulnerable to subscriber churn. While Airtel has raised tariffs by a lesser margin than Jio's 12-25 per cent, it has hiked its 2G subscription plans as well, a category Jio hasn’t touched.
Industry Arpu to rise
An analysis by Careedge Ratings estimated that the revised tariffs would improve the blended average revenue per user (Arpu) of telecom companies by 15 per cent to ~220 in (FY25), up from about ~191 in FY24. “Our analysis expects every ~1 increase in Arpu to add about ~1,000 crore to the industry’s profit before interest lease depreciation and tax (PBILDT).”