Rediff.com  » Business » Airtel, Vodafone to lose 50 mn users

Airtel, Vodafone to lose 50 mn users

By Romita Majumdar
December 30, 2018 08:23 IST
Get Rediff News in your Inbox:

These customers will be unable to meet the lowest recharge requirements for Jio, meaning they will either exit the market or migrate to BSNL/MTNL.
Romita Majumdar reports.

Illustration: Dominic Xavier/Rediff.com

Illustration: Dominic Xavier/Rediff.com

As Bharti Airtel and Vodafone Idea seek to shed their low-revenue customer base to improve profitability, they are likely to witness a gradual increase in average revenue per user, say analysts.

The move, however, may see over 50 million customers exit the market or switch to other service providers, the analysts added.

During its second quarter results, Airtel said it would stay out of the feature phone and 2G customers base competition to continue its focus on long-term high-end customers.

Airtel's strategy is to raise minimum ARPU through a revised focus on recharge plans (also starting at Rs 35) as well as the rapid rollout of 4G sites to address a smartphone-led subscriber base.

The move is likely to impact 70 to 100 million of its low ARPU user base, according to initial estimates.

 

'The introduction of the new Rs 35 minimum monthly recharge will impact the 2G voice-only users, lifting this cohort from around Rs 20 at present. This, plus the loss of lower-end subscribers, should result in the average blended ARPU for Bharti increasing by 12 per cent to Rs 113. Vodafone Idea may see its ARPU increase by 14 per cent to Rs 101,' stated Bernstein analyst Chris Lane in a note to investors.

While analysts expect ARPU upside for both Bharti and Vodafone Idea this year as they cancel lower value SIMs, they do not expect 3G/4G pricing to start to creep up until 2020.

Rival Vodafone Idea has shared plans to raise the minimum recharge tariffs to improve profitability.

According to the plan, a subscriber will now need to recharge for a minimum of Rs 35 per month for integrated data and voice services in order to keep the SIM card active.

The Telecom Regulatory Authority of India has directed the telcos to inform subscribers in a clear and transparent manner about the changes following customer complaints. But the companies are legally entitled to withdraw any tariff plan that is older than six months.

"The new simplified tariff plan gives us a monthly recurring income at a minimum Rs 35 per month (including data services). We believe consumers have the capacity to spend and the tariffs will stabilise," Vodafone Idea Chief Executive Officer Balesh Sharma had said some time back.

While Bharti has disclosed 100 million customers are spending less than Rs 35 per month, for Vodafone Idea this base is estimated to be around 150 million users.

Assuming 20 per cent of these customers may exit or leave the operators, it would result in Bharti losing around 20 million customers and Vodafone Idea 30 million.

These customers will be unable to meet the lowest recharge requirements for Jio, meaning they will either exit the market or migrate to BSNL/MTNL, Lane felt.

Public sector operators BSNL/MTNL are likely to keep a steady revenue market share of less than 5% even as they gain roughly 10% of the subs exiting Airtel and Vodafone Idea as the incumbent telcos and Reliance Jio battle it out for market share over the next few years.

The telcos's move towards weaning out low-revenue customer base comes as it is estimated that around half of 750 million subscriber base (around 350 mn) are currently on double SIMs. Of these, around 250 million are estimated to recharge their number with only Rs 10 per month to keep it active.

Thanks to the double SIM users, the total number of mobile connections in India is around 1.1 billion.

Around 30% to 40% of the subscribers at the top constitute nearly 80% of the revenues for telcos.

Get Rediff News in your Inbox:
Romita Majumdar Mumbai
Source: source
SHARE THIS STORY 

Moneywiz Live!