Airtel scraps low-value postpaid plans
Bharti AirtelNSE -1.59 % has scrapped its low-valued postpaid plans of less than Rs 499 across circles and halved the total number of its offers for this higher-paying user segment to four, to boost its revenue per user, lower costs, and improve profitability.
The Sunil Mittal-led mobile operator has now made Rs 499 the entry price point for its postpaid customers who make up 5-7% of its 284-million subscriber base but contribute 20-25% of its revenues, indicating that the country’s second-largest telco is willing to sacrifice some more subscribers for higher revenue and profitability by increasing its average revenue per user (ARPU), a critical operational metric.
Airtel has discontinued its Rs 299 and Rs 399 postpaid plans along with higher value plans of Rs 649, Rs 1,199 and Rs 2,999. It now offers just four postpaid plans — Rs 499, Rs 749, Rs 999 and Rs 1,599 — that came into effect from May 1, 2019, as per information provided by Airtel stores, Airtel app and customer care.
A person familiar with the matter said the Rs 349 plan is in use for some limited users in a few circles but would be phased out.
Airtel didn’t respond to ET’s queries as of press time Monday.
“This is all driven by economics and profitability,” said Hemant Joshi, partner at consultancy firm Deloitte Haskins and Sells. “The postpaid customer is a sticky customer and will not move by a few rupees here or there.”
Bharat Bhargava, partner, telecom advisory services, at EY India, said the reason for terminating even some high value plans is to minimise cost. Telcos analyse their offerings constantly and would retain only high-selling plans as there is a cost involved in carrying every product, which includes that of call centre employees and systems associated with it.
“Everything comes at a cost, and if you want to give better customer experience, you need to cover those costs,” Bhargava said. “This enables telcos to offer better customer experience at a price point which is acceptable to clients and gives some sort of margins. You want to simplify plans for customers.”
Among Airtel’s rivals, Reliance Jio has only one post-paid plan while Vodafone Idea still retains several plans.
Airtel is under immense financial pressure and had been posting losses for its India mobile operations since the entry of Jio over two years back. The telco has been lately taking steps to boost its ARPU, even at the cost of losing customers. It had, for example, introduced minimum recharge plans for prepaid customers.
Such initiatives have helped Airtel improve its ARPU over the last two quarters. Brokerages have estimated that the telco’s ARPU may have increased more than 20% sequentially in the fiscal fourth quarter ended March to around Rs 125, narrowing the gap with Jio whose ARPU for the quarter is estimated at Rs 126.2.
Airtel is also gradually redeploying its airwaves historically used for 2G and 3G for 4G services. “There are chances that Airtel had very limited customers on Rs 299 or Rs 399…however, the move is more about increasing ARPUs than cleaning up the post-paid base opposed to what they did with the minimum recharge plan for the pre-paid segment,” said Rohan Dhamija, head of India & Middle East at telecommunications and media consulting firm Analysys Mason.