The share of postpaid subscribers in overall wireless mobile subscribers is expected to rise ~400 basis points (bps) to ~12% this fiscal, aided by the recent recalibration of postpaid tariffs by telecommunication companies (telcos).

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 narrowing gap between postpaid and prepaid monthly average revenue per user (ARPU), would be the key enablers for postpaid subscription.

For context, sector’s postpaid ARPU is estimated to have declined to ~Rs 245 in fiscal 2023 from ~Rs 275 in fiscal 2021. Meanwhile, prepaid ARPUs moved up to ~Rs 170 from ~Rs 130, 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 lead to further narrowing of the gap.

Says Naveen Vaidyanathan, Director, CRISIL Ratings, “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 good benefits being offered under renewed postpaid plans, will drive up the share of postpaid subscription to ~12% from ~8% currently. However, India will continue to lag developed countries such as the US, where postpaid accounts for over 75% of the total mobile subscribers.”

Having a higher share of postpaid subscribers benefit telcos in many ways. Postpaid services are considered premium as these contribute higher ARPUs than prepaid subscribers. Moreover, as these are usually availed of by subscribers with higher incomes, they are less sensitive to revision in pricing, and are unlikely to move to competition. Metros alone account for ~30% of the total postpaid subscription in India, despite having only ~10% of overall subscribers.

Says Rounak Agarwal, Team Leader, CRISIL Ratings, “Telcos are aggressively targeting postpaid subscribers, as they are seen to be the early adopters of 5G services. The benefits of increase in postpaid subscription may, however, partially get offset by moderation in postpaid ARPUs in the near term because of competitive offerings now compared with earlier. We expect postpaid ARPUs to come down moderately by ~6-8% to ~Rs 225-230 in fiscal 2024. However, the gains would accrue in the medium to long term as postpaid subscribers are stickier in nature.”

Meanwhile, lucrative benefits such as free unlimited 5G data and access to more digital content would keep inducing subscribers to move to higher data plans. This would be further accentuated as 5G experience gets smoother with the expansion of network coverage and as more 5G retail use cases get unlocked, thereby aiding the sector’s growth.

That said, as telcos vie to gain share of the premium subscriber market, any significant change to the tariffs and benefits being offered currently would bear watching.