Tariffs For Telecom Carriers To Hike By 20-25 Percent

Tariffs For Telecom Carriers To Hike By 20-25 Percent

The country’s top three private telecom carriers will raise tariffs again in the second half of the current fiscal year and end FY23 with a revenue increase of 20-25 percent. A rise in average income per user is required for the sector to invest in the network and spectrum. According to a report by domestic rating agency Crisil’s research branch, failure to do so may result in unsatisfactory service offerings. Following years of severe competition caused by the advent of the deep-pocketed Reliance Jio, the sector began raising pricing in December 2019.

According to a source, India’s top three private telecom operators – Bharti Airtel, Reliance Jio, and Vodafone Idea – would boost charges again in the second half of this fiscal year. According to a May 31 report, India’s top three private telecom carriers would increase rates again in the second half of this fiscal year, resulting in a 20-25 percent rise in income for FY23.

Domestic rating agency Crisil’s research wing claimed that an increase in average revenue per user is vital for the sector to engage in networking and frequency. That failure to do so will result in unsatisfactory service offerings. In subsequent years of fierce competition, the industry began boosting prices in December 2019 with the arrival of Reliance Jio.

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Overall Amount of Subscribers

According to the survey, the number of subscribers declined in the previous fiscal year as 3.70 crore inactive users were weeded out while active members climbed. According to the study, the three largest telecom carriers increased active users by 3%, with 2.90 crore new members added to the total. Reliance Jio’s total subscriber count declined substantially between August 2021 and February 2022.

 According to the business, Bharti Airtel’s active subscriber share grew to 94 percent in March 2022, up from 78 percent in the first quarter of the previous fiscal year. Bharti Airtel also gained 1.10 crore active customers, over the fiscal year, pushing its active user share to 99 percent.

Considerations For The Increase In Tariffs

During Airtel’s earnings call earlier this week, MD and CEO Gopal Vittal stated that the firm anticipates a pricing increase in 2022. Not in the next 3-4 months since SIM consolidation and growth must resume, but another wave of rate increases is likely. During the company’s earnings call in late January, Vodafone Idea CEO Ravinder Takkar made a similar comment. Takkar noted that the latest tariff increase in November last year occurred after a two-year break and that the telecom will not wait another two years for another pricing increase.

 Following a protracted rate battle sparked by the arrival of Reliance Jio, as well as headwinds from legacy concerns, the three telecom sector companies – Bharti Airtel, Vodafone Idea, and Reliance Jio raised their tariffs in November 2021. Airtel grew pricing by 18 to 25 percent, while Vodafone Idea increased charges by up to 25 percent across all contracts.

Reasons For Tariff Increase Significant For The Sector

Two private telecom operators, Vi and Bharti Airtel have Supreme Court judgments requiring them to pay more than Rs 58,250 crore and Rs 43,890, respectively, in adjusted gross revenue (AGR) dues. Even though both corporations have chosen a four-year moratorium on the spectrum and AGR dues, they will have to come up with the cash for payment after the moratorium expires. The rate increase proposed by a major telecom operator is a much-needed move toward restoring the sector’s profitability and return profile. It would also allow carriers to invest in the medium-term rollout of 5G mobile services.

India Ratings says this creates a chance for the industry’s other two competitors to raise pricing since Bharti Airtel’s statement on Monday is expected to affect almost 95% of its overall user base. The pricing hike announced by Bharti Airtel is one of the steepest and broadest (reaching across several tariff levels) seen in recent memory, and it applies to prepaid consumers, who account for around 95% of Bharti Airtel’s overall subscriber base. Vodafone Idea has hiked prepaid prices by 25% from November 25. The cheapest package offered on the operator’s network will now cost $99 instead of $79. The top-tier plan of $2,399 will cost $2,899.

After Airtel’s recent announcement, experts believed that the remaining two telcos, Vi and Reliance Jio, would announce their pricing increases shortly since a tariff hike is longer needed for the cash-strapped industry’s ‘ARPU repair. Vi quickly followed suit, announcing its new rate package on the same day.

Vodafone Idea Will Intensify Its Rates By Up To 25%

From November 25, Vodafone Idea (Vi) will boost pricing for all of its prepaid plans by up to 25%, a move that will assist the cash-strapped telco in strengthening its financials and competing with competitors Reliance Jio and Bharti Airtel, as well as stop customer losses. Vi said in a statement Tuesday that from November 25, the telco’s entry-level plan will be 25% more costly at Rs 99, while 11 additional mobile phone plans and four data packages will be around or over 20% more expensive.

The telecom is following in the footsteps of Bharti Airtel, which announced a 20-25 percent pricing increase on Monday, effective November 26. Jio, The Mukesh Ambani-owned telecom industry leader, is also anticipated to raise prices in line with its competitors.

Conclusion

With the increased telecommunications rates, Telecom consumers will undoubtedly experience improved services in the form of enhanced networks, more services, and innovation. The 5G auctions are coming up soon. The auction would become more appealing if the telecom industry could see any improvement. While required to maintain a sound economic model, tariff increases will be modest, and analysts agree on a schedule for future telecom price revisions.