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Airtel reported a 19 per cent rise in its ARPU in the March quarter, as it removed the non-paying users from its network.
Conversion of 2G subscribers (subs) to 4G subs is not yet helping Bharti Airtel improve prices.
The company indicated that the 19 per cent growth in the January-March quarter average revenue per user (ARPU) was driven largely by the minimum recharge plans.
However, data subscribers are yet to channel ARPU growth for the telco.
In addition, the company has indicated that the recent upgrades of the Rs 99 Plan to Rs 119, and Rs 149 to Rs 169 have helped to prevent any degradation in the ARPU.
What is more worrying is that with the 10-per cent-plus jump in data subscriber base over the past three quarters has not translated into significant ARPU gains, say analysts.
“The shift of customers from 2G to 4G typically gives around Rs 70-80 in ARPU.
"Also many of our 2G customers are already in the higher data bracket. Historically, the shift to 4G has not given us a huge ARPU upgrade due to the presence across different price points,” says Gopal Vittal, chief executive officer, Bharti Airtel.
Airtel reported a 19 per cent rise in its ARPU in the March quarter, as it removed the non-paying users from its network.
The firm’s ARPU in the January-March quarter was Rs 123, 18.6 per cent higher than the same period last year, it said in a statement.
“The pain point is that although 17 million subscribers have upgraded to data over the last six months, ARPU has not risen significantly,” said Rajiv Verma, co-head of research, SBICap Securities, in a note to investors.
This, he said, suggests it is not revenue but cost savings that will accrue to Airtel in the medium term, with the closure/trimming of the 2G network and shift of more of its network resources to 4G.
Airtel posted a 29 per cent jump in net profit to Rs 107 crore for the quarter ended March 2019, even as the Street had anticipated a loss in the range of Rs 700 crore.
This movement, according to SBICAP, will be more gradual and staggered, with Airtel unlikely to completely shut down its 2G network in the medium term.
Moreever, it highlights that mere subscriber upgrades to data will not boost valuations; industry pricing, too, needs to be revised upwards.
Airtel has about 115 million data subscribers, compared to 306 million of Reliance Jio and 146 million of Vodafone Idea.
Airtel, however, has the highest data usage at 11 gigabytes per subscriber per month, compared to 10.9 GB of Jio’s and 8.8 GB of Vodafone Idea’s.
The management further noted that while competitive intensity is stable, the marketplace is still brutal in terms of the pricing structure.
Photograph: Rupak De Chowdhury/Reuters
