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India has over 1 billion mobile users but about 350 million subscribers are still legacy subscribers i.e 2G with access to only voice and message services and contribute less than Rs 50 to average revenue per user (ARPU). Besides, another 30 million 2G and 3G data subscribers who also contribute negligible to ARPU.
Prepaid users form 90% of total mobile subscribers of telecom operators and have always enjoyed multiple benefits as players look to retain them in such a competitive market<\/a>.
Airtel has raised the minimum recharge plan by 57%, raising effective tariffs in two markets Haryana and Orissa. The move has come across as a bold and surprising one as market experts were expecting a minimal tariff hike<\/a> in minimum recharge plans which are mainly for 2G users.
The move is in line with the plan of limiting legacy and 2G\/3G pack offerings and focus more on offering 4G\/5G packs<\/a> which will drive a mass upgradation wave.
However, the strategy to increase baseline tariffs could backfire. The churn rate could go even higher and new mobile additions may decrease<\/a> and ultimate revenue impact could be much lesser if the strategy is applied pan India.
The rollout cost of 5G along with spectrum cost has put telecom players in a dock and not to mention the expansion cost of 4G network. There has been talk of a mobile tariffs hike, which was last undertaken in November 2021, to improve financial health of the industry<\/a> ultimately enabling an increase in revenues.
The average mobile data prices in India, which is the fastest growing mobile market in the world, is at around $0.3 per GB which is still one of the lowest globally with the cheapest data plan costing just $0.1 per GB. This gives telecom players enough headroom for a tariff revision. Besides, the aggregate cost of 5G roll out in India will be the highest<\/a> at up to $75 billion among 15 emerging nations between 2020-35, according to a latest report.