The ongoing price vs data war has majorly benefited mobile phone users, but the cutthroat competition has also left telcos in a tough spot. Low ARPUs (average revenue per user) are hurting the earnings of telecom operators, and to boost their revenues, telcos have also introduced monthly recharge plans starting at Rs 35. And those who recharge less than Rs 35 a month would now stand a chance of losing their mobile connection.
According to a report on the Financial Express, Vodafone Idea has roughly 150 million subscribers who recharge for less than Rs 35 a month, whereas Airtel has about 100 million users in the same bracket that recharge for less than Rs 35. So, a combined total of 250 million are mostly dual-SIM users, on 2G network, and they do a lower monthly recharge, only keeping the connection for incoming calls.
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So, in case of Airtel, out of roughly 330 million users, 100 million are generating monthly revenues not more than Rs 10. The earnings from these users is not more than Rs 100 crore. After introducing the minimum recharge of Rs 35, the company hopes to generate a revenue of Rs 350 crore. Even if we consider that half of the subscribers are lost in the process, even with 50 million subscribers, the revenues will still be Rs 175 crore.
“It was a substantial number that were using it either only for incoming or had got ARPUs below that of the average or that of unlimited customers. The ARPU of non-unlimited is about a fourth of the ARPU of the customers who take the unlimited plan. Therefore, everybody who goes up the chain is an upside, even within the non-unlimited, because now he or she is paying a rupee in the Rs 35 a month package,” Vodafone Idea CEO Balesh Sharma said told FE.
Currently for the July-September quarter, Airtel has reported an ARPU of Rs 101, whereas Vodafone Idea has an ARPU of Rs 88. Reliance Jio, on the other hand, has reported an ARPU of Rs 131, and that is because the lowest plan from the telco is priced at Rs 49 a month. The move to have minimum recharge of Rs 35 a month should further see a boost in ARPUs for both, Airtel and Vodafone Idea.
Besides boosting ARPUs, there is one more reason for this move. Telcos want to shut down 2G networks and move to expand 4G coverage to compete with Reliance Jio. By weeding out low paying 2G users, there is an opportunity for telcos to move subscribers to 4G, at least the feature phone users. Introducing of a 4G feature phone, just like Jio did with the Jio Phone could help the telecom companies further.