After announcing a price hike of up to 25% for their telecom packs starting July 3-4, telecom companies Airtel, Jio, and Vodafone Idea are encouraging customers to recharge their plans for the long term at the old rates. This strategy aims to reduce customer loss.
For long-term plans lasting 365 days and costing between ₹2,545 and ₹3,099, Airtel, Jio, and Vodafone Idea are using in-app promotions to urge customers to recharge early and save money. “There has been a significant increase in daily recharge volumes for all validity periods, with all three telecom companies advertising through in-app promotions, offline retail networks, and payment aggregators,” a telecom executive said.
Paytm, the largest mobile recharge platform for these telecom companies beyond their own apps, reported a 15-20% increase in daily recharges. “There is also a growing preference for long-term plans,” a Paytm spokesperson said.
Airtel, Jio, Vodafone Idea, as well as payment platforms GPay and PhonePe, did not respond to ET’s emailed queries before the article was published.
Analysts suggest that while this strategy may lead to recharges at lower prices, causing telcos to miss out on the increased amounts, it will also ensure that subscribers stay with the operator for at least a year. However, they also question how effective this offer will be since most telecom users usually opt for shorter-period plans.
“I am sure there will be cases where subscribers will want to recharge in this 4-5 days’ window to save costs,” said Balaji Subramanian, vice-president at stock research firm IIFL Securities. “However, the number of subscribers who will recharge for 365 days is very low. For Airtel and Vodafone Idea, 28-day plans are the most common, while for Jio, it is a mix of 28 days and 84 days.” He added that in rural markets, price-sensitive customers prefer daily data plans over monthly packs, and some rural families might also give up dual SIMs.
Despite this, as seen in the last two rounds of price increases, a 20% tariff hike has typically led to a 14-15% increase in companies’ revenues, which is expected this time as well, Subramanian said.
For urban households, telecom spending could rise to 2.8% in FY25 from 2.7% in FY24, while for rural households, it could increase to 4.7% from 4.5%, according to an Axis Capital report. Consequently, CareEdge Ratings estimates that the revised tariffs will improve the telcos’ average revenue per user (ARPU) by about 15%, reaching ₹220 in fiscal 2025 from around ₹191 in fiscal 2024.
Every ₹1 increase in ARPU will add about ₹1,000 crore to the industry’s profit before interest, lease, depreciation, and tax (PBILDT), the firm added. According to ICICI Securities, SIM consolidation is a reason for revenue loss during price hikes.
“Nonetheless, operators have prevented major downgrades or mass customer exits,” ICICI Securities stated in a report, adding that Airtel had the best tariff translation during the tariff increases in 2019 and 2021, while Jio’s translation improved sharply in the November 2021 tariff increase. “Vodafone Idea has struggled due to SIM consolidation and subscriber churn,” the report noted.
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