NEW DELHI: India’s telecom sector spent 2020 in a kind of stalemate—at least where prices were concerned. This, even as the massive AGR-related liabilities and attendant provisions attached to two out of the only three major private telecom operators in India resulted in quarter after quarter of large losses. Analysts have long held that another round of major price hikes was inevitable, but with India’s telecom market virtually an oligopoly, 2020 saw it grapple with a problem unique to oligopolies that cannot agree.
Analysts note that a price hike is essential to bring margins back to sustainable levels, especially since a costly 5G roll-out beckons and network maintenance costs are likely to increase due to increased scrutiny on imported equipment. Even for Reliance Jio, which has no major AGR liabilities to deal with. For Bharti Airtel and Vodafone Idea, with large AGR payouts needed, a price hike is a critical requirement.
However, all through 2020, the three firms kept prices stable, with industry executives saying that it was a matter of who blinks first. “The competition is intense and pricing is very important in the segment,” said one requesting anonymity. The Covid pandemic and its impact made things worse initially, but the digital explosion has helped boost revenues.
“Like any other sector, the telecom industry was also impacted by the pandemic with a sharp fall in the number of subscribers in March and April. However, business and individuals adopted digital ways, the telecom industry emerged as a saviour. Many telecom players have benefitted from a surge in the traffic of data and voice,” noted COAI director general S P Kochhar.
Now however, with AGR payouts no longer uncertain, analysts expect hikes early this year. “A price hike, which looked uncertain in the last 6-9 months due to the challenging economic scenario, has started to look imminent with weakening subscriber growth across players. Our recent interactions with industry experts indicate a potential price hike of 15-20% in the next two months,” Motilal Oswal Financial Services said in a recent report.
4G spectrum auctions may be lacklustre
According to ICRA Ratings, the spectrum auctions set for March 2021 largely is not likely to see any major participation and are expected to fetch Rs 55,000 – 60,000 crore to the exchequer