As per a Goldman Sachs’ research note, Bharti Airtel is likely to be the first operator to raise tariffs, improving the chances of a near-term tariff hike in the prepaid smartphone sector, which accounts for 60 per cent of Airtel’s FY21 revenues.
Following the discontinuation of its Rs 49 prepaid plan in four service areas over the past few days, Airtel has now terminated the plan across India (all 22 service areas), meaning customers in this sector would now have to pay a minimum of Rs 79 (per 28 days), or 61 per cent more than before.
To this end, Goldman Sachs sees a high likelihood of Vodafone Idea following Airtel’s actions over the next few days, and notes that Jio’s entry level plans are already broadly in line with that of Airtel’s new pricing. Therefore, Airtel’s increase in tariffs might act as a significant catalyst for the sector, Goldman Sachs added.
Further, Goldman Sachs stated that Bharti Airtel has about 55 million subscribers on the Rs 49 plan and that this effective pricing hike will result in 3 to 6 per cent incremental wireless revenues/EBITDA for the company (based on 4QFY21 data), or Rs 5 in incremental monthly ARPU.
In addition, Airtel discontinuing the Rs 49 plan at a pan-India level suggests the company did not see any material subscriber churn in the four services areas it had discontinued this plan earlier. However, Goldman Sachs notes that Jio is yet to reveal the pricing of its Google-partnered smartphone, and if the handset is priced closer to that of current feature phone handsets (sub-Rs 1,000), Jio could potentially win some incremental market share.
Furthermore, Bharti Airtel terminating the Rs 49 plan on a pan-India basis implies that the firm did not notice any significant customer attrition in the four service areas where it had previously terminated this plan, Goldman Sachs said.
