Airtel CEO says tariffs should go up

Bharti Airtel on Thursday mentioned tariffs must go up, and the query is of proper timing, because the telco asserted that ARPU ought to rise to Rs 200 and finally to Rs 300 for a sustainable enterprise mannequin.

Speaking at an earnings name publish Q1 outcomes, Airtel CEO Gopal Vittal mentioned the indicative reserve worth for 5G spectrum, as beneficial by regulator, is “very expensive”, unaffordable and doesn’t help enterprise case at these ranges.

The 5G ecosystem is “still nascent” and industrial roll out of 5G continues to be just a few years away, he mentioned.

“Fundamental issue on 5G is that cost of the spectrum at Rs 50,000 crore for 100 MHz is way over the top for any kind of business model to work. Cost of spectrum needs to come down and ecosystem needs to evolve, and it is still early days.

“Device costs are nonetheless excessive for 5G and additional time they’ll hold coming down, however proper now, we do not see it crashing in a rush,” Vittal said.

The company said that it will build 5G solution in the lab and work with disruptive partners to bring innovative solutions to the table. On the issue of Chinese equipment and vendors, Vittal said Airtel works with multiple companies, including Chinese and European partners, and looks at “proper industrial mannequin”, unique offerings, and “value constructions” while doing so.

“That mentioned, if there may be any authorities notification that emerges, then we are going to abide by the legislation of the land,” Vittal said. He was replying to a specific question on what would be the impact on roll out plans and cost structure in case of a ban on Chinese telecom equipment vendors.

Bharti Airtel on Wednesday reported widening of losses to Rs 15,933 crore for June quarter — its fifth straight quarter of loss — as the telco recorded an incremental provision of about Rs 10,744 crore towards statutory dues it owes to the government.

At the earnings call, Airtel senior management said that the latest provisioning is likely to be “virtually full and remaining” and mark “the closure of provisions” that the telco needs to make, since the AGR (Adjusted Gross revenue) amounts cannot be recalculated or reassessed as per the Supreme Court order.

Bulk of December tariff hike flowed through in the March quarter, Vittal said and termed as “unlucky” the current pricing structure in the market that offers generous data allowances for low levels of ARPU (Average Revenue Per User).

“At some stage, worth structure in India must get extra smart with a chance to uptrade as you eat extra knowledge. That is at the moment not the case, and I hope sooner or later we can make that shift,” he said, adding that currently increase in data consumption by an existing user is not translating into “significant” rise in revenue.

“We proceed to consider that ARPUs want to maneuver as much as 200 and finally to 300 for a sustainable enterprise mannequin…I feel tariffs must go up, and the query actually is the appropriate timing for it. We consider that at some stage we ought to be prepared for it, I am unable to touch upon specifics of when,” Vittal said.

ARPU, a key metric for telecom companies, improved to Rs 157 from Rs 129 in Q1FY20 for Airtel “led by full influence of tariff hikes” in the previous quarter alongside “persevering with deal with high quality clients”.

ARPU was also better when compared to Q4FY20 level of Rs 154.

Asked if the company was looking at first mover’s advantage in rolling out 5G services in the country and the equipment ecosystem it is eyeing, Vittal flagged concerns over the high reserve price of 5G spectrum.

“We will be unable to afford it at these ranges. We do not consider there’s a enterprise case at these ranges. Secondly, the ecosystem for 5G may be very nascent, each of purposes and gadgets.

“For most new technologies, we have been out there first off the block… be it 3G or 4G…we need to be ready when the ecosystem is ready (for 5G), but there is no point in being too ahead of the game. We believe that this will be at least a couple of years on before 5G has any meaningful significance in India,” Vittal mentioned.

The firm is working with a number of companions, and has invested in R&D crew to work with “disruptive partners”.

“We are committed to continue to do so, and we will continue to work with disruptive partners to bring some of those solutions,” Vittal mentioned.

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