(Bloomberg) — Bharti Airtel Ltd., India’s second-largest wireless carrier, will increase prices of its mobile plans by at least 20% later this week, signaling that the cut-throat price war in the sector may be phasing out.
The operator, helmed by billionaire Sunil Bharti Mittal, has priced its cheapest, entry-level mobile plan at 99 rupees ($1.3), up from 79 rupees earlier or 25% higher, according to a statement Monday. Bharti has also raised the tariffs of 11 other mobile plans and three data packages by 20%. All price hikes will be effective from Nov. 26.
“Bharti Airtel has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at 200 rupees and ultimately at 300 rupees,” for a reasonable return on capital that allows for a financially healthy business model, it said in a statement. “Therefore, as a first step, we are taking the lead in rebalancing our tariffs.”
It reported mobile ARPU in India of 153 rupees in the latest quarterly earnings this month. Bharti’s shares advanced almost 4% in Mumbai on Monday, the most in three weeks, while S&P BSE Sensex fell 2%.
“The tariff hike is coming ahead of expectations,” said Neerav Dalal, a Mumbai-based analyst at Kim Eng Securities Pvt., who sees this as a positive development for the company and the sector. “Bharti is taking the lead in tariff increases,” he said, adding that other operators may follow suit.
Pricing Power
The move paves way for rivals, especially the unprofitable smaller rival Vodafone Idea Ltd., to follow Bharti’s lead as India’s battered wireless operators take further steps to repair their balance sheets. Reliance Jio Infocomm Ltd., which entered the market in 2016 with free calls and ultra-cheap data, unleashed a tariff war that shrank India’s telecom space from a dozen players to three private sector operators as others exit, merged or went bankrupt.
But the shakeout has now given more pricing power to the surviving wireless carriers and will give them more flexibility as they gear up to roll out the speedier 5G services. Bharti had undertaken price hikes in 2019 and then again in August this year.
A higher ARPU “will enable the substantial investments required in networks and spectrum,” Bharti said. “Even more important, this will give Airtel the elbow room to roll out 5G in India.”
Bharti’s mobile tariff hikes is expected to improve its net debt-to-Ebitda metric, Bloomberg Intelligence analyst Sharon Chen said in a note Monday. “Vodafone Idea is likely to follow suit, but there is less certainty as to whether market leader Reliance Jio will also increase prices,” she wrote.
(Updates with closing share prices in fourth paragraph.)
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