Why Telecom Companies Jio & Airtel Have Announced Price Increase in Recharge Plans?

India’s two giant Telecom industries Reliance Jio and Airtel has brought havoc to a middle-class person’s pocket, as both the companies in a seek to monetize their 5G services & to improve the financial health of the sector have announced tariff hikes.

Jio has raised tariffs by 12-25 per cent and skyrocketed the prices of some premium plans. The most affected plan is – 28 days validity with 1.5 GB of data per day- this plan saw a rise of 25%. Whereas on the other side Airtel has increased the prices by 11-21 per cent.
The companies will implement the new prices from July 3.

Why the prices have been increased?

The reason is to increase company’s ARPU’s (Average Revenue per User). Increasing this would better the financial health of the sector which would eventually benefit the company to monetize 5G tech.

In the quarter ended March 2023, Airtel’s ARPU stook at Rs 209. and Jio’s ARPU stood at Rs 181.70 and Vodafone Idea’s at Rs 146.

In 2016, when JIO launched 4G services, it was free for at least 3 years and then was selling at cheaper rates, this disrupted the market competition in India forever. It led India become a country with cheapest data services anywhere in the world. As a result the numbers of netizens multiplied drastically. However, now the telecom industry is aiming to rise prices to boost their financial health since they have spent a lot giving free, and to welcome 5G they need money!

According to an Indian Express article, analyst Bernstein, there was an anticipation that the telcos will raise the price post the general elections.

5G Monetization begins

Here’s a note by JP Morgan makes this thing clear that states, “The fact that Jio, the sector price setter, has led the tariff hikes rather than (Airtel/Vi) as in prior rounds is a statement of intent that its focus has shifted from share gains to monetization,” it said in an analyst note.

He further added, “Jio preimmunized 5G access by increasing the threshold for unlimited 5G data to > 2GB/day plans from 1.5GB/day plans that effectively drives a 46% increase in tariffs for 5G users, 2x the overall hikes driving 5G monetization,”