Airtel, Vodafone Idea’s subscriber base may decline due to reduced affordability in 2G plans, Telecom News, ET Telecom

Airtel, Vodafone Idea's subscriber base may decline due to reduced affordability in 2G plans, Telecom News, ET Telecom

NEW DELHI: Bharti Airtel and Vodafone have taken their highest increases in the base 2G package, which would make the telecommunications service less affordable and could lead to some slippage of subscribers, ICICI Securities said.

“… we expect the number of subscribers to decline in the next few quarters due to reduced affordability in base 2G plans and SIM consolidation due to general tariff increases,” said analysts at ICICI Securities, adding that they further expect subscribers to downgrade to lower GB per day plans.

The two companies have announced increases of 20-25% across prepaid plans in the last two days. They have taken the highest increases in the basic packages of 79 Rs, which has now been revised to 99 Rs for 28 days.

In particular in Q2FY22, both telecommunications companies increased their base plans from Rs49 to Rs79. In the last two quarters, the tariff for the basic package for speech only (used by 2G subjects) has thus doubled to Rs 99 from Rs 49.

Data plant tariffs (for 4G users) have been increased by ~ 20%. The most popular plan (offering 1.5 GB / day for 84 days) has experienced a 20.2% jump to Rs719 from Rs598.

“We would have liked it more if the players had taken a steeper increase in 4G data plans while maintaining the affordability of 2G mobile services. We anticipated a change in the tariff structure (despite the fact that we assigned it a very low probability!) By move away from unlimited data in the baseline plan, which would have paved the way for premiumization, “analysts added.

Vodafone Idea’s base plan has now risen to Rs 99, forcing consumers to recharge to higher plans, giving a huge boost to ARPU. “However, this could result in further consolidation of dual SIM cards, increasing the churn,” said Motilal Oswal.

ICICI Securities expects Jio to follow suit and increase tariffs by the same amount – thus keeping its ‘20% more ‘value proposition intact.

The narrowing of postpaid tariffs compared to prepaid and increasing content offerings with family plans is likely to help Bharti Airtel push more postpaid subscriptions. Prepaid accounts for ~ 80% of mobility revenue for both telecommunications companies and new tariffs will result in an increase of 21% prepaid ARPU. “14% of 2G revenue increases by 25%; and remains to increase to 20%. We see a 16.7% increase in mixed ARPU / revenue for Bharti and VIL,” ICICI Securities added.

Bharti Airtel’s ARPU in Q2FY22 was Rs153, which should increase by Rs26 (or 16.7%) to Rs179. Incremental mobile revenue from the latest tariff increase is Rs99 billion, and with a 70% incremental EBITDA margin, the additional EBITDA would be Rs69.6 billion. The annual consolidated EBITDA for Q2FY22 amounted to Rs552 billion, and the rate increase was to add 12.6% to it.

Vodafone Idea’s ARPU in Q2FY22 was Rs109, which should increase by Rs18 (or 16.7%) to Rs127. Incremental mobile revenue from the tariff increase is Rs55 billion, and with a 70% incremental EBITDA margin, the extra EBITDA would be Rs39 billion. VIL’s Q2FY22 annualized consolidated EBITDA stood at Rs155bn, and the most recent tariff increase was to add 25% to it.


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