Airtel CEO hints at tariff hike in 2022 amid cost pressure, 5G rollout

Gopal Vittal says hike could happen after 3-4 months depending upon subscriber growth and competitive dynamics; asserts his firm will not hesitate to lead the spike

Bharti Airtel chief executive officer Gopal Vittal, on Wednesday, hinted at another hike in tariff in 2022 as the telecom sector battles cost pressures and prepares for 5G service rollout.

Vittal said he expects a tariff hike some time in 2022 and that could happen after 3-4 months depending upon subscriber growth and competitive dynamics. “We would not hesitate to take the lead in hiking tariffs,” he said while hoping average revenue per user (ARPU) to rise from the current Rs 163 to Rs 200.

Airtel was the first to raise tariffs for prepaid plans last November. Vodafone Idea and Reliance Jio followed soon after with around 20 per cent increase in rates.

Last month Vodafone Idea CEO Ravinder Takkar too had spoken of possible hike in tariffs in 2022.

While the rate increases led to a sequential increase ARPU for companies, it also led to decline in customer base. While Airtel lost around 600,000 customers, Jio lost 8.5 million and 5.8 million customers respectively in the third quarter.

Vittal expects moderation in SIM consolidation over February and March and a return to growth in the first quarter of the next fiscal. There has been a significant SIM consolidation due to the tariff hike but it is much lower compared to 2019, he said.

The Telecom Regulatory Authority of India is currently holding consultations with service providers on 5G service. Spectrum auction is expected between May-June. Vittal said the industry is hoping for substantial reduction in reserve price for 5G tariffs and easier payment terms for spectrum. He also added at present only around 3-4 per cent of smartphones in the country are 5G-enabled and that would go up to 10-12 per cent by next March. On the consumer side widespread usage would thus be seen by 2023-24, he indicated.

Airtel reported 2.8 per cent year on year dip in net profit in Q3 FY 22 due to higher tax outgo. Net profit in the quarter stood at Rs 830 crore. The company generated free cash flow of Rs 8803 crore in the third quarter up from Rs 7046 crore in the previous year. Bharti group director (strategy and business development) Harjeet Kohli said the company would use its free cash flows to reduce high cost debt.

The company faced cost pressures due to rising diesel costs and its operational expenses also saw an increase due to faster network rollout and capacity enhancements.

Vittal said the company is taking a slew of measures to reduce costs and complexities including use of artificial intelligence to lower energy costs and renegotiation of telecom tower rents.