Tel­cos turn to first recharge plans for gains

Move is aimed at en­sur­ing greater SIM con­sol­i­da­tion, boost­ing rev­enues

Business Standard - - FRONT PAGE - ROMITA MAJUMDAR

In­cum­bent tele­com ser­vices providers are turn­ing gate­keep­ers to keep out low-rev­enue sub­scribers af­ter they wit­nessed some growth in the aver­age rev­enue per user (ARPU) through min­i­mum monthly recharge plans.

With tele­com dis­rup­tor Re­liance Jio not rais­ing tar­iffs, in­cum­bents Bharti Air­tel and Voda­fone Idea are fo­cus­ing on the min­i­mum monthly recharge and higher first recharge of­fers to en­sure they re­tain only loyal and rev­enue-in­cre­men­tal sub­scribers.

Dur­ing the De­cem­ber-quar­ter earn­ings call, Voda­fone Idea’s man­age­ment said that in­stead of hav­ing mul­ti­ple of­fers across 22 cir­cles for new SIM cards, they had created a com­mon ac­qui­si­tion plan at ~76. This means that the ex­ist­ing cus­tomers get a bet­ter deal than the new ones.

Bharti Air­tel in­tro­duced a sim­i­lar plan last month at the ex­act same price point across some cir­cles.

Sources said both Idea and Voda­fone In­dia had launched the ~76 first recharge plans be­fore their merger last year, but this was the first time the man­age­ment dis­cussed it. An­a­lysts see the de­vel­op­ment as a move to en­sure a greater sub­scriber iden­tity mod­ule (SIM) con­sol­i­da­tion as users are forced to spend a bulk amount on at least one SIM card.

If a new Voda­fone Idea cus­tomer wants to get a sim­i­lar deal, they must buy a SIM card at ~76. “It cre­ates bet­ter loy­alty with the ex­ist­ing base and stops the pop­u­la­tion of low-qual­ity ac­qui­si­tions and, there­fore, higher churn. So we are kind of ar­rest­ing the high-growth, high churn model to bring it down to a bet­ter base man­age­ment, as also a bet­ter man­age­ment of the cost of ac­qui­si­tions,” said Balesh Sharma, CEO, Voda­fone Idea.

Both Air­tel and Voda­fone re­ported a slight jump in their ARPU in the De­cem­ber quar­ter af­ter al­most two years of con­stant de­cline since Re­liance Jio’s en­try.

The ARPU growth, while fa­cil­i­tated by monthly min­i­mum recharge plans, re­sulted in an ex­o­dus of al­most 83.6 mil­lion low-end sub­scribers from the two in­cum­bents com­bined. While Jio wit­nessed a slight dip in ARPU, the telco added 28 mil­lion sub­scribers.

“The com­pany (VIL) in­di­cated that sub­scriber churn on SIM con­sol­i­da­tion and min­i­mum recharge will con­tinue in Q4FY19 also. How­ever, it in­di­cated that the ex­ited cus­tomers had ex­tremely low ARPU (high sin­gle digit).

There­fore, resid­ual ARPU would be higher,” noted Bhu­pen­dra Ti­wary, an­a­lyst, ICICI Se­cu­ri­ties.

While an­a­lysts have cheered Voda­fone Idea’s ro­bust 4G sub­scriber ad­di­tion, there have still been con­cerns about the growth of its 4G base, which is slower than ri­vals.

Over the past two months, the two in­cum­bents have in­tro­duced al­most sim­i­lar plans at com­pa­ra­ble price points as they inch the mar­ket to­wards grad­ual tar­iff hike. Air­tel has in­tro­duced this plan even as the man­age­ment (and an­a­lysts) has given up the hope of or­ganic tar­iff growth un­til Jio de­cides to raise tar­iffs.

“We believe that we are only about 750 mil­lion to 800 mil­lion unique mo­bile cus­tomers in In­dia and a small pro­por­tion of these cus­tomers con­trib­uted the bulk of the in­dus­try rev­enues. And this is where our fo­cus will be, serv­ing high-qual­ity cus­tomers.

Hence, from last quar­ter, we launched min­i­mum ARPU plans to en­sure that ev­ery cus­tomer who stays on the net­work gives us a min­i­mum com­mit­ment,” said Ni­lan­jan Roy, global CFO, Bharti Air­tel dur­ing the Q3 earn­ings call.

Air­tel de­clined to com­ment on queries re­gard­ing the strat­egy be­hind the higher first recharge plans.

Jio has con­tin­ued to keep its ARPU in ~130 -135 range over the past few quar­ters due to high trac­tion across the ~99 and ~149 plans.

In De­cem­ber, both Voda­fone Idea and Air­tel made changes to their flag­ship ~399 plan while in­creas­ing prices of 28-day va­lid­ity plan.

The higher va­lid­ity of ~399 recharge plan narrows the price gap with Jio.

The in­cum­bents are, how­ever, try­ing to ex­pand the pen­e­tra­tion of 4G in their sub­scriber base as they take their 4G net­work to the hin­ter­land of In­dia.

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