Friday, July 30, 2021

Telcos roll out minimum recharge plans for users

Wednesday, October 31, 2018, 18:19
This news item was posted in Business category and has 0 Comments so far.

KOLKATA: The good times for marginal consumers of mobile phone services may finally be over. Bharti Airtel and Vodafone Idea’s recent decision to ring in minimum recharge prepaid packs signals their bid to boost average revenue per user (ARPU), focus on profitable customers and weed out those that aren’t generating any revenue. Market leader Vodafone Idea and No.2 Airtel have introduced a 28-day validity period on a host of sub- Rs 100 prepaid packs — such as Rs 35, Rs 65 and Rs 95 — which means consumers who don’t recharge on these plans would see outgoing calls blocked in 30 days and incoming in 45 days. Analysts said the move indicates the two big incumbents have finally realised that there’s been way too much pricing damage over the past two years since Reliance Jio’s disruptive entry, which has taken a toll on their revenue and profitability, and needs urgent correction. “Airtel and VIL seem to be finally saying enough is enough by introducing minimum recharge plans across India to boost ARPU and don’t seem to mind losing some freeloaders who were anyways not generating any cash for them,” Sanjiv Bhasin, executive vice president, markets & corporate affairs, IIFL, told ET. Both incumbents, he said, appear to be “focusing on the middle and upper-tier customers who don’t typically switch operators overnight like the base level value hunters”. Vodafone Idea did not reply to ET’s queries. Jio’s pricing aggression since its entry in September 2016 had forced India’s older carriers to match rates to retain customers, galvanising consumption of voice and data services. Subscribers benefitted but India’s older mobile phone companies got hit. Fringe players who couldn’t withstand the fierce price wars exited and the sector consolidated down to three large private players–Vodafone Idea and Bharti Airtel among the older ones and Jio – making it an ideal market situation for pricing power to return over time. Rohan Dhamija, partner and head of India & Middle East at Analysys Mason, however, feels the introduction of minimum recharge plans from VIL and Airtel suggests “tariffs may start edging up by the third/fourth quarters of FY19 itself, culminating in pricing power making a gradual comeback”. Last week, Airtel chief executive Gopal Vittal had said the country’s second-largest telco “expects prepaid ARPU to start improving by the fiscal third quarter onwards on account of the minimum recharge plans, which should also lead to a reduction in the company’s selling, general & administrative (SG&A) expenses. He was speaking on an earnings call following the company’s September quarter results.

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