Airtel’s price hike will prove to be a breather for the telecom industry. 5G spectrum plans to benefit from this decision. Average Revenue Per User to increase and returns on capital also seem to be promising.

Subscribers are still wondering why Airtel has announced a sudden hike in prepaid mobile tariffs. The prices have been hiked to 20-25 % of the existing rates and will be put into effect from November 26^th. So many speculations have been circulating as to why the telcos made such a decision.

As measures of overcoming a crisis period, the telecom services provider had earlier opted to take the 4-year moratorium as a means of increasing its cash flow. The recent announcement on price hikes can be interconnected to their long term plans of increasing revenue generation.

The main reason behind the revised tariffs could be based on their plans to roll out 5G services earlier than expected. The extra cash flow is most likely to be directed towards the implementation of 5G services throughout the country. The financial calamity in the telecom industry had forced all the operators to postpone their 5G plans as we had reported some days back.

With the company finding innovative means of revenue generation, let’s hope to see some action being taken to speed up the postponed plans. Rs 37,000 crore is the estimated amount Bharti Airtel expects to spend in the 5G spectrum auction.

Crisil Says

According to Crisil, the hike in prepaid mobile tariffs is a crucial part of supporting the profitability of the entire telecom industry. Crisil reports state that such interventions will aid in the increased chances of potential investments in the 5G plans for the country. The increasing tariffs are also likely to increase the ARPU of the industry by 15-20%. This will however be possible only if the other telcos like Reliance Jio and Vodafone Idea also decide to increase their price tariffs.

Although India has the second-highest average data traffic per user in the world, in terms of ARPU, India is nowhere near the top. Also, the Indian telecom industry is far behind in its returns on capital investment. So the estimation by Crisil reports is that ARPU could see an increase to Rs 155 – Rs 160 during the next fiscal period from the current Rs 135. The returns on capital are also expected to see a hike of 7% in the next fiscal year.

To summarise, we strongly believe that Bharti Airtel is a forerunner in setting a new trend in the revenue generation of the Indian telecom industry. Let’s hope that these moves pave the way for a secure future for all the telecom service providers in India.