According to a report by JM Financial, Bharti Airtel is working to increase its postpaid customer base by aggressively rolling out 5G as a pivot to attract subscribers from Vodafone Idea Limited (Vi), which is yet to roll out 5G.

Currently, Airtel has 6 per cent postpaid subscribers, compared to 20-40 per cent in other emerging markets. However, Airtel’s strategy of focusing on premium consumers has resulted in significant average revenue per user (ARPU) growth in recent quarters, despite in the absence of tariff hike-related opportunities.

According to the report, Airtel’s focus on premiumisation to drive ARPU is estimated to grow at a compound annual growth rate (CAGR) of 9 per cent to Rs 300 in FY28. Of this, 3-4 per cent increase could continue to be driven by mobile broadband (MBB) upgrades/data consumption growth, while 5-6 per cent growth is expected to be driven by regular tariff hikes.

Airtel’s premiumisation strategy is expected to result in a 13 per cent earnings before interest, taxes, depreciation, and amortisation (EBITDA) CAGR. It is also attempting to attract premium consumers by upgrading feature phones to smartphones, which will result in a doubling of ARPU.

Additionally, the telco is encouraging pre-paid to post-paid upgrades through family post-paid plans, aggressive 5G rollout, and data monetisation as customers opt for extra data or higher data limit plans. The telco’s simplified plans and a significant increase in entry-level pre-paid tariffs have contributed to its premiumisation strategy.

As per the report, near near-term delay in tariff hike is likely to only strengthen Airtel and Reliance Jio’s pricing power and market share as it is likely to expedite the transition to a duopoly market by further deterring Vi’s fund-raise plan.