The Telecom operators may look at raising rates in the postpaid segment shortly after hiking prepaid tariffs.
For Bharti Airtel and Vodafone Idea, it makes sense as they have a meaningful presence here.
Despite this the customer stickiness is high in the postpaid segment and pricing plays a very limited role in the purchasing decision.
It seems that raising tariffs does not lead to a churn as it is a possibility in the prepaid segment.
Earlier, Bharti Airtel had hiked tariffs in the postpaid segment for corporate users in July along with some tweaks in its family plan.
Rise In Tariff Is Inevitable
According to the emerging markets technology, media & entertainment and telecommunications (TMT) leader, EY, Prashant Singhal, “The increase is inevitable as India is still the lowest tariff country in the world and with the increase in prepaid, postpaid is likely to follow suit,”.
So far, the postpaid market is worth around `22,000 crore in revenue terms .
It forms 15% of the sector’s revenues and 5% of the sector’s active subscribers, as per the estimates by Jefferies.
Out of this, almost 50-60% of these subscribers are enterprise customers.
While, 34% of postpaid subscribers are situated in the three metros and another 36% in urban centric A-circles.
Less Focus On Pricing
Coming to operators, Vodafone Idea has the highest 43% market share followed by Bharti Airtel at 28%.
In the case of Bharti, over 50-60% of its postpaid subscribers are enterprise customers.
That means their focus is less on pricing and more on sustained track record of service delivery.
Basically, postpaid users form 5% of Bharti’s subscribers and 16% of its India mobile revenues.
The former CEO of Bharti Airtel,Kapoor said, “If Airtel raises prices in postpaid and Vodafone Idea does too, those customers are not going to migrate to anybody because they anyway are at the premium-end of the market and not as sensitive to pricing as they are habituated to paying much higher bills. For them to pay a higher price for brand preference and for better customer experience, I don’t think is a big challenge,”.
Moreover,the analysts also feel that a postpaid hike can be expected after a few months.
Telecom Operators Desire To Increase Arpu
Beside this, both Bharti Airtel and Vodafone Idea have indicated their desire to reach an Arpu (average realisation per user) of Rs 300 in the coming future.
They would need this to remain sustainable in the market.
Presently, Vodafone Idea has the lowest Arpu of Rs 109 among telecom firms.
On the other hand, Bharti Airtel leads with an Arpu of Rs 153, while Reliance Jio’s Arpu stands at Rs 143.6.
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