Mobile phone users in India may soon see higher bills as telecom companies plan to increase tariffs, according to a report from Axis Capital. The hike, expected to be around 25%, aims to boost telecom operators’ average revenue per user (ARPU).

The report suggests this increase is manageable for both urban and rural users due to steady demand for data services. Urban households’ telecom spending is expected to rise from 3.2% to 3.6% of their budget, while rural spending will increase from 5.2% to 5.9%.

The 25% hike in rates could result in a 16% ARPU growth for major telecom companies like Bharti Airtel and Jio. Jio had an ARPU of Rs 181.7 for the quarter ending March, while Bharti Airtel and Vodafone Idea (Vi) reported ARPUs of Rs 208 and Rs 145, respectively, for the last quarter of 2023. Bharti Airtel and Vi have not yet released their March figures.

Telecom operators plan to monetize their 5G investments by adjusting tariff structures, particularly for bundled packages. Peeyush Vaish from Deloitte expects a 10-15% ARPU increase, adding around Rs 100 per subscriber by year-end due to these adjustments and the phasing out of low-value plans.

Analysts believe Bharti Airtel and Jio will benefit most from the price hikes. A report by Kotak Institutional Equities noted that these companies saw significant ARPU growth between September 2019 and September 2023 after multiple tariff increases. Vi, despite a similar ARPU rise, experienced a decline in overall wireless revenue due to subscriber losses.

Vi’s CEO Akshaya Moondra mentioned that their focus on upgrading 2G subscribers, who make up nearly 42% of their base, is affecting ARPU growth.