Need to hike tariff, ARPU must near Rs 200: Airtel CEO Gopal Vittal

Bharti Airtel has stressed on the need to raise its average revenue per user (ARPU) to Rs 200 in the near term and Rs 300 in the long term. Further, Airtel CEO Gopal Vittal on Wednesday reiterated the need to increase tariffs.

The company hopes to see greater adoption of smartphones with its cashback offer as it looks at different ways to increase data consumption along with ARPU.

Vittal said he was unsure if Jio’s new smartphone JioPhone Next will drive customer upgradation to smartphones in a big way. He also reiterated the need to increase tariffs.

“I have been to five-six circles (states). I have seen that the buzz in the market is high. There is a sense of excitement about the cashback scheme,” Vittal said in a post-result conference call on Wednesday.

Last month, the company launched its Rs 6,000 cashback offer for smartphones costing up to Rs 12,000. The offer is available on purchase of around 175 entry-level smartphone brands. The company hopes that this will lead to greater conversion of feature phone users into smartphone users.

Vittal said smartphones are seeing cost pressures due to increase in cost of chipsets and screens, among others. Without naming any brand, he said it was premature to comment on the impact of JioPhone Next.

Airtel posted a consolidated net profit of Rs 1,134 crore in the second quarter of FY22, aided by improved operational performance and exceptional income.

ARPU increased sequentially to Rs 153 from Rs 146 due to increase in tariffs in the low-end prepaid user segment and premiumisation of services. Vittal said the company is also seeing greater traction in the postpaid segment.

Vittal added that the company will accelerate investments in network expansion, broadband and data centres, among others. “Our operating cash flows are strong,” he said.

The seminal reforms announced by the government for the telecom sector will help preserve cash flows and enable the industry to drive investments, Vittal pointed out.

“As you are aware, the government announced seminal reforms that will help preserve cash flows and enable the industry to drive investments. There have also been substantial steps taken to simplify the way we do business by cutting back on several needless approvals and easing the customer on-boarding processes," he noted.

On deferring of payments, Vittal explained that upon opting for the moratorium (as Bharti has), the interest payable on moratorium is converted to a net present value (NPV), with 1-2 choices.

“One, is to defer the payout at the end of the four-year period or to actually pay it every year in the anniversary period that comes in, or to convert into equity. All options are still open," he said.

The decision on converting to equity has to be taken in January but the other two decisions are calls that can be taken every year. The company will continue to be fiscally prudent and ensure that business continues to invest in areas of massive growth such as broadband, data centres, enterprise business, digital assets and rolling out of 5G networks.

To a question on timelines for 5G rollout, Vittal said the industry has urged telecom regulator to look at all spectrum bands.

“You need to look at all spectrum bands to see what is the totality of spectrum that will be available in India...much of it is sitting with defense so that has to be unlocked, to make sure that we are able to, as operators, understand what should our spectrum strategy be,” he said.

The 700 MHz band spectrum was "very high priced" and saw "three failed auctions" and those need to get "substantially moderated in terms of price", he said.

"Then there is 3.5 GHz where a lot of spectrum is lying with defense, how much spectrum is going to be available is another question and, of course, there is mmwave (millimetre wave)band...so all of this spectrum will have to be put on the block and I don't know whether that can happen soon," Vittal said.

Airtel on Tuesday reported a net profit of Rs 1,134 crore for the September 2021 quarter, and said it is witnessing strong business momentum with growth in 4G customers and increase in mobile ARPU.