The Great Indian 5G Battle Heats Up!
The year was 2016, and the Indian telecom space witnessed the grand entry of Reliance Jio, which completely disrupted the industry. A cutthroat price war followed, leaving the other players struggling to keep up. Bharti Airtel partially exited its East African markets in 2017, while Vodafone and Idea Cellular merged in 2018 to survive.
But amid all this chaos, a segment remained untouched: the postpaid segment. With the majority subscribers being prepaid customers, telecom players didn’t pay much attention to the postpaid segment – until now.
You see, the business model of these telecom operators is fairly simple. Higher the subscriber base, the higher the potential for generating profits. Also, these companies aim to maximise the ARPU or average revenue per user, the average billing per customer earned by the telecom company every month.
Now, when it comes to postpaid customers, they account for a small subscriber base than prepaid customers. But still, they contribute more to the revenue of these telecom operators. If we look at some numbers, according to Economic Times, Airtel’s postpaid subscriber share is around 6% of its total subscriber base. Whereas, Jio’s subscriber base is said to be around 5%. But the one that will surprise you is that Vodafone Idea’s subscriber base is a whopping 9.6%!
According to the same report, the postpaid ARPU is almost three times the prepaid ARPU.
So, how would telecom operators miss out on such a huge revenue stream?
Even though Airtel 5G and Jio true 5G has been successful, the success is not the same when it comes to acquiring postpaid customers.
Jio was the first to attract more postpaid customers, as they announced postpaid plans that included unlimited 5G data, OTT, and other great benefits. Later, Airtel also stepped up by offering unlimited 5G data to certain prepaid and postpaid customers by introducing new postpaid plans to compete with Jio.
But, as we know, customers’ preference comes down to the product’s pricing.
How are the Postpaid Plans Priced?
According to Economic Times, Jio has a postpaid plan that offers four connections for Rs 174 per connection or two connections for Rs 249 each.
Airtel also has a new plan that costs more than Jio’s plan. According to Financial Express, Airtel offers Rs 300 for two connections, which is over 20% more expensive than Jio.
So, amid price differences, the postpaid 5G war has started!
The telecom industry needs a lot of money to function properly, especially with the launch of 5G. This means that telecom companies have invested a lot of money. To make more money, they need to increase the amount they get from each user, which basically means an increase in average revenue per user (ARPU).
Bharti Airtel has been talking about how important it is to raise prices in the industry. Airtel and Vodafone Idea (Vi) have said current prices are unsustainable.
Sunil Bharti Mittal, the head of Bharti Enterprises, has recently suggested that the monthly ARPU should reach a level of Rs 300.
With that being said, it remains to be seen what the future holds for the telecom industry.
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Teji Mandi is a SEBI Registered (SEBI Registration No. INH000009445) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.