Postpaid user base may rise to 12% by fiscal end

The share of postpaid users in India’s overall mobile user base is likely to increase to 12% by the end of fiscal 2023–24 from the current around 8%, aided by the recalibration of tariffs by the top two telcos, Reliance Jio and Bharti Airtel, an industry report showed.

Unlimited 5G data and access to a wider range of over-the-top (OTT) content offered by select plans under the new tariffs, along with a narrowing gap between postpaid and prepaid monthly average revenue per user (ARPU), would be the key enablers for postpaid subscription, as per a report by CRISIL Ratings.

The top two telecommunication companies, Reliance Jio and Bharti Airtel, announced changes in tariffs last month. These two telcos have made their family postpaid schemes more attractive by bundling them with unlimited 5G data offerings.

Read | WPI inflation eases to 29-month low of 1.34% in March

“We expect the differential between postpaid and prepaid ARPUs to narrow to 1.1-1.2 times this fiscal, compared with 1.4-1.5 times now. That, along with the good benefits being offered under the renewed postpaid plans, will drive up the share of postpaid subscriptions to 12% from 8% currently,” said Naveen Vaidyanathan, Director, CRISIL Ratings.

Despite these projected increases, the postpaid user base in India will remain much lower when compared with countries like the US, where postpaid accounts for over 75% of the total mobile subscribers.

Having a higher share of postpaid subscribers benefits telcos in many ways. Postpaid services are considered premium, as they contribute higher ARPUs than prepaid subscribers.

Moreover, as these are usually availed of by subscribers with higher incomes, they are less sensitive to revisions in pricing and are unlikely to move to the competition. Metros alone account for 30% of the total postpaid subscriptions in India, despite having only 10% of overall subscribers.

The tariff gap between postpaid and prepaid users has narrowed in recent years. The postpaid monthly average revenue per user (ARPU) is estimated to have declined to Rs 245 in the fiscal ended March 2023 from Rs 275 in fiscal 2020-21.

Prepaid ARPUs moved up to Rs 170 from Rs 130 during this period, thereby reducing the gap between postpaid and prepaid ARPUs by almost 50% over fiscals 2021-2023. This has led to an increase in the share of postpaid subscribers by 300 basis points to 8% in the last two fiscals, after staying flattish over fiscals 2017-2021.

The recent launch of competitive family postpaid plans along with additional OTT access benefits will further narrow the gap.

“Telcos are aggressively targeting postpaid subscribers, as they are seen to be the early adopters of 5G services,” said Rounak Agarwal, team leader at CRISIL Ratings.