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Vi, Airtel back tariff plan to make consumers pay as per their usage | CPT PPP Coverage

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Vi, Airtel back tariff plan to make consumers pay as per their usage appeared on economictimes.indiatimes.com by Kalyan Parbat.

The next phase of telcos’ bid to boost average revenue per user (ARPU) is set to be around the pricing structure, with Vodafone Idea (Vi) and Bharti Airtel backing the pay-as-you-use or ‘tier-based’ tariff model where mobile users with higher levels of data usage have to shell out more.

But that could be difficult to implement on ground as market leader Reliance Jio is believed to be opposed to the tiering of price plans—where data allowance is linked to the tariff plan—as it feels such an exercise can complicate tariff structures, confuse consumers and eventually hurt data usage.

Analysts said while the pay-as-you-use model or tier-based pricing model can boost telco revenue, it can work only if implemented collectively by all operators.

At Vi’s fiscal third-quarter earnings call on February 15, chief executive Akshaya Moondra said the pricing structure needs to evolve where people start paying more for using more. He had added that despite a wide range of consumption, a customer now pays the same independent of the level of usage.

“But as happens with all industries, all services whether you use electricity, water, anything which are in the nature of essential services, there’s a base charge, and then there’s a charge which is based on usage,” said Moondra.

Airtel MD Gopal Vittal, in the telco’s Q3FY22 earnings call, had also underlined anomalies in India’s compressed telecom pricing structure, noting that massive data allowances (42 GBs) in low-value prepaid plans like the Rs 299 (over a 28-day period) resulted in consumers being unable to exhaust their monthly quota, and hence, not feeling the need to upgrade to higher value plans.

Vittal, in fact, had backed what he called “a more sensible pricing architecture” like in other Asian markets such as China and Indonesia where the data limit in entry-level plans is kept low, and rises only as consumers upgrade to higher value plans. Such a pricing structure, he had said, would also drive premiumisation in the sector.At press time, Jio, Airtel and Vi did not reply to ET’s queries.

At present, most entry-to-mid range tariff packs bundle large dollops of data, unlimited local/STD calls and a daily dose of 100 text messages.

Analysts say any migration to a tier-wise pricing exercise must be carefully calibrated as sudden cuts in data allowance in entry-level plans could cause a dip in consumption, a scenario in which ARPU growth would suffer. The ARPU is a key performance metric for telcos.

“Based on global practices, tiering of price plans as a principle is the way to go for boosting ARPUs, but it must be done carefully and also in unison by all telcos… the exercise won’t work if a single telco takes the step and the others don’t back the move,” Rohan Dhamija, head (India & Middle East) at Analysys Mason, told ET.

The latest overtures around tweaking pricing structures come at a time when the likes of Airtel have hiked minimum base rates almost across India and are also aggressively expanding into rural India to corner more 4G users and win the share of smartphone usage. They also come when Airtel and Jio are rapidly rolling out 5G networks across India and telcos broadly agree on the need for tariff hikes to achieve the targeted Rs 300 ARPU level—from under Rs 200 now—to recover cost of capital.

Vi, on its part, needs a significant ARPU boost besides closing its long pending external fundraise to pave the way for its much-needed investments in its 4G network and also for rolling out 5G and lead to sufficient cash generation from its operations.

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