Arpu convergence belies a persistent prepaid-postpaid tariff divergence

India's prepaid ARPU has overtaken postpaid for the first time, but experts say tariff gaps will persist as M2M users and premium postpaid benefits reshape the market

Tariff divergence between India’s prepaid and postpaid customers is likely to remain wide even as the average revenue per user (Arpu) gap between the two segments narrows, according to industry watchers and experts.

 

While prepaid Arpu had remained lower than postpaid for many years, the trend reversed in June 2025 and again in March 2026. Experts believe this could now become a sustained pattern due to the rise in machine-to-machine (M2M) subscribers, which stood at more than 131 million as of May. About 10 per cent of India’s 1.3 billion mobile subscribers use postpaid connections. The share of postpaid users has risen from 8-9 per cent in previous years, according to Telecom Regulatory Authority of India data.

 

“Telecommunications (telecom) Arpu in India has undergone significant changes over the past five years. The differential between postpaid and prepaid Arpu in the quarters ended March 2021 and March 2026 was ₹129 and ₹1.9 (with prepaid being higher than postpaid), respectively. This was primarily driven by prepaid Arpu increasing by a whopping 102 per cent, while postpaid Arpu declined by 14 per cent. The majority of M2M SIMs are postpaid, which is one of the primary reasons for bringing down the overall Arpu in this segment," said Prashant Singhal, markets leader and telecommunications leader at EY India.

 

Prepaid Arpu stood at ₹196.22 in March, higher than the postpaid Arpu of ₹194.31. Calculated quarterly, the metric indicates how much a telecom company earns from each customer every month. According to Crisil Ratings, every ₹1 increase in Arpu adds ₹850-950 crore to the industry’s operating profit, making the metric a key indicator of a carrier’s profitability.

 

Singhal pointed to minimum prepaid recharge plans becoming significantly more expensive over the years, with telecom operators implementing three rounds of tariff hikes since 2019, each ranging between 10 per cent and 21 per cent.

 

Market watchers, including JM Financial and Axis Capital, expect another tariff hike of 10-15 per cent over the next three to six months, which would further lift Arpu. “There is also improved visibility of a 12-15 per cent tariff hike in the next three to six months with easing inflationary concerns after the opening of the statement of hearing (given the last tariff hike was in July 2024), coupled with the government’s intent to ensure a 3+1 player market and the industry’s need to improve return on capital employed amid its inability to monetise the significant 5G capital expenditure already incurred,” analysts at JM Financial said in a note dated July 1.

 

However, postpaid customers continue to pay significantly more than prepaid users every month, valuing network quality, brand and customer service, and are generally less price-sensitive. “Entry-level prepaid and postpaid plans remain meaningfully apart in pricing. More importantly, postpaid continues to differentiate itself through bundled benefits such as family plans, international roaming, over-the-top (OTT) subscriptions, and other premium services, which may not be fully utilised or valued by every user," said Siddhant Cally, senior research analyst at Counterpoint Research.

 

For many consumers, prepaid remains the more convenient option because it offers flexibility, better control over spending, and a service proposition that meets their needs. “There will always be some migration from prepaid to postpaid, particularly among higher-value users, but I wouldn’t equate the narrowing Arpu gap with a broader shift towards postpaid,” Cally added.

 

Experts also observed that there is limited differentiation in the postpaid segment, as it offers relatively few additional benefits, especially since prepaid plans have increasingly focused on premiumisation through bundled OTT content and other value-added services. Moreover, India’s mobile-first digital economy has created faster and more convenient ways to recharge and pay for services. “Prepaid offers greater control and visibility over usage, along with easy service add-ons, while bill values are not too significant,” Singhal added.

 

Cally said prepaid Arpu is rising, driven by a combination of tariff hikes, higher data consumption. and the premiumisation of prepaid plans, but this should not be interpreted as prepaid users naturally gravitating towards postpaid.