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Next round of telecom tariff hikes has likely begun

According to a research note by Goldman Sachs, Airtel’s move to raise prepaid tariffs increases the probability of a near-term tariff hike in the segment.

Published: 31st July 2021 10:13 AM  |   Last Updated: 31st July 2021 10:13 AM   |  A+A-

Airtel

An Airtel billboard (File Photo | AFP)

By Express News Service

NEW DELHI:  With Bharti Airtel taking the plunge and effectively hiking its entry-level prepaid mobile services plan this week, analysts are of the view that the next round of telecom tariff hikes have likely begun. Especially since both Airtel and Vodafone Idea had hiked postpaid tariffs earlier this month. 

Tariff hikes are important for all three private telecom firms, including Reliance Jio, because the industry’s average revenue per user (ARPU) metric had taken a dive after the interconnect usage charge (IUC) was stopped this year. But for Airtel and Vodafone Idea, which have to pay AGR dues, they are a bit more important. Vodafone Idea, in particular, faces significant upcoming payments and a shortage of funds. 

According to a research note by global brokerage Goldman Sachs, Airtel’s move to raise prepaid tariffs increases the probability of a near-term tariff hike in the segment which had contributed 60% of its revenues in FY21. 

Airtel has discontinued its Rs 49 prepaid plan in all 22 circles, and entry level customers have to now pay Rs 79 per month. The agency also does not expect much subscriber churn to happen since Reliance Jio’s plans are at around the same level. “Jio’s entry level JioPhone plans start at Rs 75 (for minimum 28 days validity) and Bharti’s entry-level feature phone pricing now is broadly similar to that of Jio. Since Jio does not have a 2G network, customers would need to purchase a new 4G handset to transition to Jio’s network, a significant stumbling block in our view,” it said.

This is likely to see Vodafone Idea follow suit since it is in far worse financial condition than Airtel. “Vi has already matched Airtel on post-paid and we expect it to follow suit in prepaid,” said IIFL Securities.



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