Several firms have shared their analyst reports on Bharti Airtel, Vodafone Idea and Reliance Jio following their decision to increase tariffs of their mobile services.
Bharti Airtel and Vodafone Idea revised the tariff plans for their prepaid subscribers across India. The new tariff rates are higher by about 20-40 percent compared to the old rates. The revised plans come into effect from 3 December 2019 putting an end to the regime of free off-net calls.
Pre-paid mobile phone subscribers, who form 95 percent of the total subscriber-base of Airtel and Vodafone Idea, can now expect an increase in their mobile bill with the new plans. Some subscribers depending on their usage may move to 1.5 GB data plan per day from 2 GB data plan per day and subscribers of 3 GB data plan per day may move to 2GB data plan per day, CARE Ratings said.
There will be an increase in usage of OTT services for making calls in the wake of the FUP limit for making off net calls.
The new plans announced by the incumbents have introduced a Fair Usage Policy (FUP). Under this policy, the subscribers can make a free call to other networks as per certain limits (minute of off-net calls). Beyond the FUP limit, the subscribers will be charged at 6 paise per minute for making a call to other network.
25 percent ARPU increase can potentially treble Vodafone Idea’s Ebitda; another 15-20 percent ARPU increase required to hold on to 20 percent RMS: A 25 percent increase in revenue would result in Vodafone Idea’s Ebitda run-rate growing from ~Rs45 billion to Rs130 billion, IIFL Securities said.
There will be no any negative elasticity impact as all telcos are looking to raise tariffs at almost same magnitude. Besides, before Jio launch consumers were paying avg. of Rs 180-200 per month which has gone down to nearly Rs 120 per month, DSP Merrill Lynch India said.
Vodafone Idea’s revenues could be about 22 percent higher assuming a subsequent hike for post-paid customers, vs. what they reported in 2QFY20, with EBITDA about 170 percent higher, Goldman Sachs India said.
Bharti Airtel’s revenues could be 24 percent / 12 percent higher for wireless / consolidated vs 2QFY20, with EBITDA 70 percent / 26 percent higher wireless / consolidated.
There will be some risk to subscriber additions for Bharti Airtel and Vodafone Idea at the lower end, given competition from JioPhone. Tariffs of Bharti Airtel and Vodafone Idea are now at 26-43 percent premium vs Jio’s plans.
There will be ARPU increase of 28-31 percent and 7-10 percent for FY21/FY22E for both Bharti Airtel and Vodafone Idea respectively. For Jio, the ARPU increase stands at 22 percent/8 percent over the same time frame, Emkay Global said.
