Bharti Airtel, Vodafone Idea hike tariffs – here’s all you need to know

Is the era of ultra-low mobile tariffs in India near its end? 

At least that is how it appears, with two of the three largest mobile carriers in India—Bharti Airtel and Vodafone Idea—announcing a 20-25% hike in prepaid tariff rates from November 25 and November 26. 

What have they said to justify these increases?

Airtel said Monday its tariff hikes will help it “provide a reasonable return on capital for a financially healthy business model”.

“Bharti Airtel has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at Rs 200 and ultimately at Rs 300,” it said.

ARPU is essentially the revenue that a telecom service provider realises on average from each paying consumer. 

“We also believe that this level of ARPU will enable the substantial investments required in networks and spectrum. Even more important, this will give Airtel the elbow room to roll out 5G in India,” Airtel said.

Vodafone Idea gave similar reasoning. “The new plans will start the process of ARPU (average revenue per user) improvement and help address the financial stress faced by the industry,” it said.

What will the new tariffs on prepaid plans look like?

In the case of both Airtel and Vodafone Idea, the Rs 79 plan will cost Rs 99, a hike of 25%. The Rs 149 plan will cost Rs 179, the Rs 1,498 plan will become Rs 1,799. The data top-ups will now cost Rs 58 (up from Rs 48) and Rs 118 (Rs 98).

Airtel’s Rs 2,498 plan will now cost Rs 2,999 while its data top-up plan of Rs 251 will cost Rs 301.

In Vodafone Idea’s case, the Rs 2,399 plan will cost Rs 2,899. Moreover, data top-ups will now cost Rs 298 (Rs 251), and Rs 418 (Rs 351).

How has the stock market reacted to this news?

Goes without saying, the market has taken this very well. 

From Rs 714 levels as at the end of last week, Airtel’s counter has jumped to Rs 757 levels by Tuesday. Vodafone Idea’s shares have inched up, too.

Is Reliance Jio also expected to hike prices?

Well, there is no word as of now. But if its two biggest rivals have hiked prices by 25%, the Mukesh Ambani-led company may not remain far behind. 

What have brokerages said about the hikes?

Global brokerages have raised Airtel’s target price following the hikes. 

Jeffries has given a ‘buy’ call and raised the target price for Airtel from Rs 860 to Rs 925 per share. 

JP Morgan has an ‘Overweight’ call on Airtel with a target price of Rs 830. It expects an 18% rise in revenue and ARPU.

CLSA has set a target price of Rs 863 per share, and expects the tariff hike to raise the revenue by 14%.

Interestingly, the hikes come even as Airtel has actually beaten Jio in net subscriber addition numbers in September.

Latest numbers released by the Telecom Regulatory Authority of India show that Airtel added a total of 2.74 lakh mobile users in September while Reliance Jio lost 1.90 crore users, and Vodafone Idea lost 10.77 lakh subscribers.