By Elton Gomes
Vodafone-Idea and Bharti Airtel have reportedly decided to switch off the connection of subscribers with low Average Realisation Per User (ARPU) rate.
Currently, while Bharti has about 100 million users who can be included in the below Rs 35 a month bracket, for Vodafone Idea the number stands at around 150 million. While Bharti has come out with seven pan-India plans beginning at Rs 35, Vodafone has come out with five plans wherein the lowest re-charge is Rs 35 a month.
We have about 330 million customers in wireless, but if you look at the pattern of consumption across the base you will find that there is a very large number of customers, some of whom we acquired from Telenor and some that we have ourselves, about 100 million customers with very low levels of ARPU. So, these ARPUs are sort of low double-digit, Gopal Vittal, Bharti Airtel CEO and managing director, said, the Indian Express reported.
What is ARPU?
ARPU (average realisation per user) is a measure of the average revenue that is generated per user. To boost this measure across customers, Vodafone Idea and Bharti Airtel introduced minimum recharge plans earlier in November.
The plan has a minimum recharge pack of Rs 35 a month. This means that users who do not recharge their plans will have outgoing calls blocked in 30 days and incoming ones in 45 days.
Earlier, a user could recharge for a top-up of Rs 10. If the plan was exhausted, a subscriber was unable to make outgoing calls, but would receive incoming calls as long as the plan was valid.
A rough estimate suggests that more than 250 million subscribers spend less than Rs 35 a month on recharge plans. These 250 million subscribers are said to be dual SIM users. This means that they have two mobile connections, and they generally use the lower recharge SIM for only incoming calls.
Airtel and Vodafone Idea have calculated that with this move either the user would move up the ARPU chain or move to the operator whose SIM he is using as a primary one.
TRAI cracks down on telecoms
The Telecom Regulatory Authority of India (Trai), on Tuesday, pulled up Bharti Airtel and Vodafone-Idea after their subscribers complained that the two companies have sent messages to their prepaid users. Both telecoms asked their users to mandatorily recharge their accounts to continue using their services despite holding sufficient balance.
TRAIs diktat came after Bharti Airtel and Vodafone Idea introduced minimum monthly recharge plans starting at Rs 35. The telecom operators are hoping that the move will help boost their ARPU, which has suffered seriously due to an intense tariff war with Reliance Jio Infocomm Ltd.
In its letter, Trai has asked telecom operators to duly inform subscribers within three days in a clear and transparent manner the date on which the current validity of an existing plan would expire.
The regulator also said that telecoms have to mention the manner in which the subscriber can opt for available plans, including minimum recharge plan using subscribers available prepaid account balance.
How will this help the telecoms?
The math behind the Rs 35 package move is simple. Roughly, the ARPU the companies get from these users is Rs 10. If the minimum recharge each month remains the same, Bharti Airtels monthly revenue from them is Rs 100 crore. It hopes that if even half users remain on the network and move to the new minimum Rs 35 a month plan, the revenue could increase to Rs 175 crore a month.
The move will see improvement in ARPUs for Bharti, which reported it at Rs 101 during the July-September quarter. Vodafone Idea registered an ARPU of Rs 88. Reliance Jios ARPU is higher at Rs 131, which is because its lowest plan comes for Rs 49 a month.
Another reason for the companies to disconnect low paying 2G users is because the companies want to shut down their 2G networks and move subscribers to 4G.
For low paying subscribers, the option for operators is either to compete with Jios Rs 500 4G feature phone, or focus on high-paying customers by transferring them to 4G bundled plansthis could also lead to an improvement in their ARPUs.
Elton Gomes is a staff writer at Qrius