Tariff At Absurdly Low Levels Compared To Other Parts Of The World; Substantial Repair Must: Airtel

Tariffs in the Indian telecom industry are at an "absurdly low level" compared to other parts of the world, Bharti Airtel Managing Director Gopal Vittal said on Wednesday as he strongly advocated "tariff repair" to lift return ratios.

Quizzed about the company's take on mobile tariffs and monetisation of 5G services, Vittal, during the Q4 earnings call of Airtel, said the industry requires substantial tariff repair and that ARPU (average revenue per user), when it climbs to the right levels at Rs 300 would remain "one of the lowest in the world".

"So, there is a substantial repair to be had in the industry...how that happens, I can't guess, but we will see how it plays out," Vittal said.

He declined to comment on specific milestones for tariff hikes.

"The return that the industry needs is predicated on tariff repair, this is the heart of the problem that we have today, our pricing and tariffs are at an absurdly low level relative to any other part of the world. So, tariff repair is needed for return ratios to improve... it doesn't matter which technology it comes from," Vittal said.

He admitted that there is limited monetisation on 5G but went on to say the company sees it in the context of an overall return on the business.

"...the fact is that 5G is future-proof technology, so to that extent, we are advancing the capex that would have anyway happened," he said.

Airtel, he said, has used multiple levers of ARPU upgradation but added that "at the end of the day, it is a competitive market and repair will need to happen across the industry".

"...just us doing it...we could do it, we could lead it, we could start it. But, the fact is if competition does not follow, it will hurt us and that is a challenge," he said, adding "So, we will just have to wait and see when the time is right".

Asked for his views on just how receptive he believes consumers would be on the extent of the tariff hike, Vittal noted that two rounds of "tariff repairs" have taken place in as many years. The SIM consolidation that followed was, at best, "modest".

"The upside benefit of repair is much greater than some SIM consolidation (happening) at the lower end," he noted.

Vittal argued that digital and mobility have become essential parts of lives and opined that people will "adjust" their spending to deal with tariff increases.

To a question on timelines for 5G monetisation given that unlimited 5G data is putting severe strain on industry ARPUs, Vittal quipped that the architecture of pricing in India is "quite broken".

"The architecture of pricing in India is quite broken because people who can afford to pay a lot more are paying a lot less...because these are unlimited plans which are like...effectively a one-size-fits-all plan," he said.

Indonesia, as well as some other markets in Asia, recognise usages in various categories - small, medium, large, and extra large.

"...that, unfortunately, is not the case in India, but it is not something that we can do alone...we will be happy to follow if this happens," the Airtel top honcho said.

The 5G free data poses a challenge, according to him.

"There is some headwind in terms of monetisation. But again, it's a competitive market. We have responded to what we've seen happening in the marketplace, and hopefully, at some point, we will see sanity prevail," Vittal said.

Airtel on Tuesday posted a 31 per cent drop in consolidated profit to Rs 2,072 crore in the March quarter, mainly due to the devaluation of the Nigerian Naira.

The consolidated revenue from operations of the Sunil Mittal-led telco increased 4.4 per cent to Rs 37,599.1 crore during the quarter under review from Rs 36,009 crore a year earlier.

Bharti Airtel's ARPU -- a key matrix for telecom operators -- grew 8 per cent to Rs 209 from Rs 193 a year ago. On a sequential basis, the ARPU was marginally higher than Rs 208 in the December quarter.