Bharti Airtel CEO Says India Telecom Tariff Structure Is 'Unfortunately Broken’
Bharti Airtel ARPU has stagnated over the past couple of quarters, due to lack of meaningful tariff hikes, CEO Gopal Vittal says.
The current pricing structure of India’s telecom sector is “unfortunately broken”, Bharti Airtel Ltd. CEO Gopal Vittal has said, with the hope that some sense will prevail in the industry to raise tariffs sooner rather than later.
A one-size-fits-all pricing approach is not the way any consumer-facing industry works, the chief executive of India’s second largest telecom operator said in a post-earnings call with analysts on Wednesday. “In our case, our (recharge) plan starts at Rs 240-250, which gives you 1.5 GB/day, plus unlimited calling, plus 100 text messages. There’s very little reason for a user to actually buy a higher plan…”
“Ideally, you should have a Rs 100 plan with very little, Rs 200 gets you more, and let’s say for Rs 1,000 you get huge amounts. Now that would actually maximise the ARPU.”
Vittal’s comments come at a time when average revenue per user, or ARPU, at Bharti Airtel has stagnated at Rs 193 over the past couple of quarters, despite a tariff hike at the lowest end of the data consumption bucket. In comparison, Reliance Jio’s ARPU stands at Rs 178.80 and Vodafone Idea’s is at Rs 138.
The New Delhi-based telecom operator has raised the price of its minimum recharge plan to Rs 155 per month from Rs 99 per month in 19 out of 22 telecom circles in India. The hike is on a par with that of its larger rival, Reliance Jio Infocomm Ltd., which is offering 2 GB of data and unlimited calling with 28 days of validity at the same price.
To be sure, this isn’t the first time Vittal is harping on the need to fix India’s tariff structure.
“Salaries have gone up, rents have gone up, except one thing. There is no one complaining. People are consuming 30 GB/month by almost paying nothing,” the Bharti Airtel CEO said at the Mobile World Congress in Barcelona in February this year.
“We need a robust telecom industry in the country. The dream of India is digital, economic growth is fully realised. I think the government is fully conscious (of that fact), the regulator is conscious and people are also very conscious.”
The lack of meaningful, across-the-board tariff hikes is taking its toll on Bharti Airtel’s return of capital employed—a metric of how well a company is generating profits from its capital as it is put to use.
“We are financially in a stronger place and operating cash flows are expected to meet capex needs, while reducing leverage as well,” Vittal said during the post-earnings analyst call. “Yet our concern on ROCE remains. At 8.5%, this is way too low, and we hope some sense will prevail in the industry to move up tariffs sooner rather than later.”
