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The operators claim the increase is necessary to support their network rollouts, as well as to encourage the Indian populace to transition to 4G
For years now, Indian telco Bharti Airtel has opined that mobile tariffs in India are unsustainable, with average revenues per user (ARPU) far too low to support the expensive network rollout costs.
At the start of this week, Bharti Airtel announced that it would finally raise its prepaid mobile prices, increasing them by up to 25% in some cases.
The most significant increase in prices have been applied to the Bharti’s 2G prepaid plans, increasing from around $1.06 to $1.32. This is seemingly to encourage non-data customers to shift from 2G to 4G, which will, in turn, allow Airtel to refarm some of their 2G and 3G spectrum for 4G.
India currently has around 300 million subscribers to 2G services.
Just days after Airtel announced the price increase, Vi said it would do likewise.
The controversial pricing issue had arisen in no small part because of the launch of Mukesh Ambami’s Reliance Jio back in 2016. The greenfield operator immediately undercut the prices of India’s existing mobile operators and triggered a vicious price war that saw mobile price plans plummet. This disruption was a key factor in the merger of Vodafone and Idea Cellular, becoming Vodafone Idea (now Vi) in 2018.
The scale of the pricing disruption cannot be understated. Before the launch of Jio, a 1GB mobile plan in India cost around 225 rupees (roughly $3), but by 2019 the same amount of data cost just 18.5 rupees (around $0.25).
For these Vi and AIrtel, this price hike could have far-reaching consequences. While they will obviously be unpopular with customers, the increased prices should help the operators’ financial health considerably. Both Vi and Airtel posted losses in the September quarter (around $956 million and $103 million, respectively) and, furthermore, still have enough government debts to clear over the next four years.
Now the major question is whether Reliance Jio will join Airtel and Vi in increasing their prices. The company has been losing subscribers recently, so it could retain its relatively cheaper prices to attract and retain customers. However, just like its rivals, Jio has expensive network rollouts and a 5G spectrum auction to pay for over the next year, so an increase seems appropriate. Analysts suggest that the company is likely to also increase its prices, though only by 10–15%.
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