For Airtel, tariff hikes would be the icing on the cake

livemint.com:

₹209, China Mobile's Arpu is about ₹550. However, before investors get excited about Airtel’s Arpu catching up, they should note the significant difference in per capita income. In 2023, China’s per capita income stands at $12,500, nearly five times that of India, driven by the size of its economy.

Although there is talk of mobile tariff hikes after the elections, an underappreciated fact is that Airtel has managed to increase its Arpu from ₹194 in Q4FY23 to ₹209 currently without any significant price hike. This was achieved through the migration of 2G/3G customers to 4G/5G, premiumization via higher data consumption plans, and an increase in post-paid subscribers. As such, Airtel’s 2G/3G subscriber base has declined to 99.5 million by FY24-end from from 111.2 million at the end of FY23.

It added 28.6 million 4G/5G subscribers, of which nearly 40% were likely the result of upgradation, as the company has not suffered any significant loss of customers. Looking ahead, it is likely that the remaining 2G/3G customer base, currently at 28% of the total customers, will also transition to 4G/5G. This shift would yield dual benefits.

First, Airtel can gain from higher Arpu (as 4G tariffs are relatively higher) even without tariff hikes. Second, there would be cost savings as redundant networks can be shut down. Moreover, higher data consumption, bundling of OTT plans, among others, lead to premiumization of plans, further boosting Arpu.