Incumbents’ minimum ARPU plans will result in 50 mn customer base erosion



As telecom incumbents and Idea (VIL) seek to shed their low revenue customer base to improve profitability, they are likely to witness a gradual increase even as over 50 million customers are likely to move out, say analysts.


In October, Airtel said it will stay out of the feature phone and 2G customers base competition as it continues to focus on long-term high-end customers during the second quarter results. Airtel’s strategy is to raise minimum through a revised focus on recharge plans (also starting at Rs 35) as well as the rapid roll-out of 4G sites to address a smartphone-led subscriber base. The move is likely to impact between 70 to 100 million of their low user base.



“The introduction of the new Rs. 35 minimum will only impact the 2G voice only users – lifting this cohort from Rs. ~20 at present to around Rs. 35. This, plus the loss of lower end subscribers, should result in the average blended APRU for Bharti increasing by 12% to Rs. 113 and for Idea seeing their ARPU increase by 14% to Rs. 101,” noted Bernstein analyst analyst in a note to investors. The report also said that while analysts expect ARPU upside for both Bharti and this year as they cancel lower value SIMs, but don’t expect 3G/4G pricing to start to creep up until 2020.


Rival Vodafone Idea has shared plans to raise the minimum recharge tariffs to improve profitability. According to the plan, a subscriber will now need to recharge for a minimum of Rs 35 per month for integrated data and voice services in order to keep the SIM card active.


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Telecom Regulatory Authority of India (TRAI) has directed the telcos to inform subscribers in a clear and transparent manner about the changes following customer complaints. But the telcos are legally entitled to withdraw any tariff plan that is older than six months.


“The new simplified tariff plan gives us a monthly recurring income at a minimum Rs 35 per month (including data services). We believe consumers have the capacity to spend and the tariffs will stabilise, “ VIL CEO Balesh Sharma said earlier.While Bharti has disclosed 100 million customers currently spending less than Rs. 35/month and the estimate this base for Vodafone Idea at ~150 million. Assuming 20% of these customers to exit or leave the operators, would result in Bharti losing ~20M customers and Vodafone Idea losing a similar ~30 million. These customers will also be unable to meet the lowest recharge requirements for Jio, meaning they will either exit the market or migrate to BSNL/MTNL.


BSNL/MTNL are likely to keep a steady revenue market share of less than 5 per cent even as they gain roughly 10 per cent of the subs exiting Airtel and VIL as the incumbent telcos and Jio battle it out for market share over the next few years.

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