Telecom prices are going to get expensive
India’s internet revolution truly took off the day Jio announced it was going to make data as good as free. all one needed was a smartphone and an Aadhar card and, just like that, they had access to the internet. Airtel and Vodafone, to keep in touch with Jio, slashed their data rates too. this prompted a slew of behaviours, from people consuming more videos to small kirana stores coming online. let’s call this phase one.
if phase one was customer acquisition, phase two is customer monetisation. meaning? you’ll have to pay a little more for your data. but why is it happening now?
for Airtel and Jio, it was a race to be numero uno. the commonly held belief was that the company holding the largest number of subscribers will ultimately win. however, that’s not true yet. Airtel, which has higher active subscribers but fewer total subscribers than Jio, has pulled ahead of Jio when it comes to average revenue per user (ARPU). Airtel made INR 166 per user compared to INR 138 for Jio. this is an important metric in telecom. currently, Jio is facing pressure from analysts to increase its ARPU. the Mukesh Ambani-led company is contemplating raising tariffs.
there are four major telecom companies in India: Vodafone Idea, Airtel, Jio and MTNL-BSNL. of these four, two are teetering under debt. Vodafone Idea, for example, is trying to service debts that go over INR 1 trillion. the combined loss of Airtel, Vi, BSNL and MTNL is almost INR 700 billion. to survive, some of them will have to raise tariffs. and that’s where the price rise will come from.
there are other ways to increase ARPU than hiking tariffs. for example, Jio is experimenting with credit for data. it is allowing its subscribers to borrow data and pay for it later. think of it like a credit card which allows you to spend now and pay later. this will encourage users to use data as they did before, without being stopped by the credit on their number running out too early.
whether the telecom companies raise tariffs or use innovative ways of increasing ARPU, data consumption will be slightly more expensive than it used to be. Indians still pay one of the lowest tariffs for data and that won’t change anytime soon.