Whalesbook
ARPU Gap Narrows Dramatically
The Indian telecom market is undergoing a major change as the price gap between prepaid and postpaid mobile plans shrinks significantly. The monthly spending difference has dropped from about Rs 160 in 2020 to just Rs 5 by 2025. Currently, prepaid users spend around Rs 194 monthly, very close to the Rs 199 average for postpaid subscribers. This is a big change from 2020, when prepaid users paid Rs 84 and postpaid users paid Rs 244. Experts attribute this near 97% reduction in the gap mainly to repeated industry-wide price hikes, achieving more than marketing efforts ever could. For the first time, the average revenue per user (ARPU) is nearly the same for both prepaid and postpaid customers, indicating a shift in how people pay for mobile service and how operators make money.
Focus Shifts to Value and Retention
This close pricing between prepaid and postpaid plans creates a new challenge for telecom companies. As the traditional way of dividing customers by price fades, operators must shift their focus to offering extra services and improving customer loyalty. Some analysts believe the smaller ARPU gap might reduce how often people switch mobile numbers (Mobile Number Portability). With less price difference, operators are looking at deals like bundling phones with plans and other premium offers. These aim to encourage users to switch to postpaid and stay with the company. While bundling phones hasn't always worked well in the past because many customers were on cheaper prepaid plans, the current price situation could make these strategies more successful. Postpaid customers tend to be more open to bundled services that offer added convenience and better value than just basic mobile service.
Dominant Players Lead Market Shift
India's telecom industry has largely consolidated, with Reliance Jio and Bharti Airtel becoming the main players, pushing Vodafone Idea (Vi) into a smaller role. As of September 2025, Airtel reported the highest ARPU at INR 256, followed by Jio at INR 211, while Vi was at INR 167. This two-company dominance is also clear in subscriber numbers; Jio and Airtel keep gaining customers, while Vi continues to lose them. Jio and Airtel have made significant investments in 5G networks, which they are now using for services like Fixed Wireless Access (FWA) to boost their ARPU. Although industry-wide ARPU is expected to increase, the major market leaders are benefiting the most from this growth.
Future Growth and New Revenue Streams
Experts expect more price increases, with a potential 12-15% rise by July 2026 and continued ARPU growth into FY27. Industry ARPU is projected to hit around ₹220 by the end of FY26 and possibly ₹300 by FY27. The sector's revenue is forecast to grow faster, thanks to these price adjustments, ongoing 5G uptake, and customers moving to more valuable plans. However, some analysts point out that relying solely on data growth might be slowing down, as ARPU has stayed around Rs 180-200 despite major investments. This has prompted telecom companies to look for new ways to make money. Small and medium-sized businesses (MSMEs) are seen as a key opportunity for future revenue, potentially through digital commerce and advertising services.
Ongoing Challenges and Risks
Despite positive ARPU forecasts, the industry still faces deep-seated problems. Vodafone Idea's financial difficulties and its gap in network investment compared to Jio and Airtel show how different the companies' paths are. Vi needs significant funding and operational changes to meet its commitments and upgrade its network. Also, while the price difference between prepaid and postpaid has narrowed, some reports suggest that postpaid ARPU for consumers is still considerably higher than prepaid ARPU, even if official figures don't show this clearly. Whether the sector can keep increasing ARPU without upsetting customers or facing government issues is uncertain. Relying on price hikes and the current price merging might not be a long-term fix if companies don't offer truly different services. The continued dominance of Jio and Airtel also raises questions about competition and new ideas, possibly leading to a market where a few companies focus more on profits than on groundbreaking services.