Post tariff hikes: Users could spend Rs 47,500 crore more, trade up data plans

Kolkata | Mumbai: Consumer spending on telecom services (inclusive of taxes) is set to jump by around Rs 47,500 crore annually on the back of hefty tariff hikes by India’s top telcos and higher rates for mobile users using 5G services.

Reliance Jio and Bharti Airtel took decisive steps towards effective 5G monetisation by making it much costlier for consumers to avail of premium next-gen mobile broadband services. The minimum charge for a Jio user to go 5G is now 46% higher. For an Airtel user, it is 71% costlier, a person familiar with the matter said.

Both Jio and Airtel have changed the entry-level pricing thresholds for their customers wanting to go 5G. A Jio mobile user wanting unlimited 5G data must now pay a minimum Rs 349 for a 2GB/day pack instead of the earlier Rs 239 base pack offering 1.5 GB/day. An Airtel user wanting 5G, in turn, needs to take an even bigger upgrade to a Rs 409 pack (offering a 2.5GB/day data allowance) in place of the previous Rs 239 pack offering 1.5 GB/day.


The higher rates, though, are expected to boost Jio and Airtel’s average revenue per user (ARPU) by 15-17%, say analysts. Citi Research estimates Airtel’s ARPU rising to Rs235/270/305 over FY25/26/27 (vs Rs 209 in Q4FY24) on the back of the latest tariff revisions.

Goldman Sachs estimates Jio's tariff hike will translate into a 17% ARPU increase.

On Friday, Sunil Mittal-led Airtel raised tariffs by 11-21% across its prepaid and postpaid platforms, a day after telecom market leader Jio hiked tariffs by 12-25%. Late Friday evening, Vodafone Idea (Vi) also raised tariffs by 10-23%, which analysts estimate could trigger around a 12-15% ARPU increase for the telco as it doesn’t yet have 5G services.

“Annual customer outgo on telecom services could potentially increase by Rs 47,500 crore after the tariff hikes, and with Jio restricting unlimited 5G data allowance to 2GB/day and above plans versus Rs 239 for 1.5GB/day and above plans earlier,” Kotak Institutional Equities said in a research note.

Analysts said the aggressive pricing moves by Jio and Airtel can potentially lead to up-trading to the 2GB/day and 2.5 GB/day plans by higher data guzzling mobile users and drive the much-delayed monetisation of 5G services. They noted that in the current scenario, 5G monetisation isn’t happening through differential pricing but by encouraging mobile users to upgrade and move up in tiered plans by offering a rising data allowance.

Goldman Sachs estimates that for every 10 million Jio subscribers moving from the older Rs 239 data plan to the new Rs 349 will garner an additional Rs 400 crore of potential annual EBITDA or `operating income’ for the Mukesh Ambani-led telco. Jio’s 5G user base in the quarter ended March 2024 stood at 108 million.

In recent months, Bharti Airtel managing director Gopal Vittal and Vi CEO Akshaya Moondra have often underlined anomalies in India's compressed telecom pricing structure, asserting that it needs to evolve to a scenario where mobile users pay more for using more as is the global practice instead of the local trend where a customer pays the same on average, regardless of the level of data usage.

Global brokerage CLSA expects Bharti and Jio’s new tariffs to drive higher spends, boosting ARPU meaningfully despite some risks of down-trading and subscriber churn.

But analysts believe the latest headline tariff hikes are unlikely to trigger large SIM consolidation. This is because a larger part of the SIM consolidation is already done and data is getting sticky, as such consumers may not downgrade as much.

Nomura Research said India’s three-private-player telecom market structure is well set up. “The industry is moving along the path of value creation and monetisation of investments, which will drive an improvement in FCF (free cash flows) generation and return ratios for players, thereby resolving key concerns for investors.”

Analysts pointed out that Jio and Airtel have been maintaining 10% on-year revenue growth without a tariff hike. Accordingly, after these latest increases, and assuming at least another revision in the next two years, Goldman Sachs estimates the revenue growth profile of both Jio and Airtel to be at 15-20% CAGRs over the next three years, with 25-30% EBITDA growth.

BNP, though, expects Jio’s larger tariff hike to drive bigger benefits than Airtel’s, building in 18% and 17% revenue growth for the two companies respectively in FY25.