NEW DELHI: INDIA’S three largest telecom majors—Bharti Airtel, Vodafone Idea (VIL) and Reliance Jio—have all announced significant price hikes this month, but the move is unlikely to alter the status quo as far as pricing power is concerned. Even though Jio has said its hike will match the 40 per cent-odd increases planned by its two rivals, analysts note that the former’s plans are likely to remain 15-20 per cent cheaper.
“Even after these hikes, we believe Jio will continue to be 15-20 per cent cheaper than the incumbent operators,” analysts from Bank of America Merill Lynch (BofAML) wrote in a note on Monday. While Vodafone Idea and Bharti Airtel’s tariff increases average out to around 25-35 per cent for the most popular plans and up to 50 per cent for a few select packages, Jio has said that it will roll out new rates which may be as much as 40 per cent more expensive.
Airtel and Vodafone Idea’s new tariffs will go into effect from December 3, while Jio will implement the new rates from December 6.
For Bharti Airtel and VIL, the tariff hikes offer a lifeline out of the financial mess they find themselves in. Analysts say that while the hikes themselves will not be enough to offset the impact of the looming payday for AGR dues, they do offer increased revenue generation and better Average Revenue Per User (ARPU). According to the Centre’s estimates, the two firms may have to pay around Rs 35,000 crore and Rs 53,000 crore come January 24 to the telecom ministry.
“The ARPU increase will be 11-19 per cent across various scenarios. Even in the best case where all ARPU for all data subscribers increase by 40 per cent, overall APRU increase will be 18 per cent and 23 per cent for VIL and Airtel,” said an analyst at global brokerage house Jefferies.
However, the increase in prices may put the brakes on the breakneck rise in data consumption in the country, which may play a part in depressing revenue gains. “We believe the consumption could be impacted by 10-20 per cent,” said Axis Capital, adding that the revenue impact may thus be limited to around 20-25 per cent with nearly 70 per cent of the gains flowing into beefing up operational margins.
What is nearly unanimous is the view that the low-tariff regime may well be over for Indian customers, as all major telcos are now expected to continue increasing prices.
“We now expect more tariff increases over the next 12-18 months,” said an analyst from Credit Suisse, leading to an ARPU increase of as much as 55 per cent by the end of FY22 compared to September this year.