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More tariff hikes on cards even as Voda Idea, Airtel, Jio users brace for bigger phone bills

Experts have come to believe that the tariff hikes would be in two stages - one by the operators themselves, which will be followed by TRAI setting up floor prices for both voice and data services

twitter-logoManu Kaushik | December 3, 2019 | Updated 13:44 IST
More tariff hikes on cards even as Voda Idea, Airtel, Jio users brace for bigger phone bills

Delhi-based Hitesh Goel runs an event management company with over 14 employees. He reimburses the mobile recharges of his employees every month who use Jio prepaid connections. Goel says that his mobile bill has gone up over 20 per cent recently when Jio asked its subscribers to do top-up recharges for off-net calls. Off-net calls are calls that a mobile subscriber makes to the subscriber of another telecom network - like Jio customer calling Airtel number. Though the impact of the recent tariff hikes is still unknown - since Jio has not revealed the quantum of its increase unlike Vodafone Idea and Airtel - Goel is preparing for another 40 per cent jump in costs - as indicated by Jio in a statement on December 1. "I ported all of my colleagues from Vodafone Idea to Jio about eight months ago because Jio was cheaper and the services were better. I accept that the tariffs were low but it helped me reduce the overall business costs," he says.

Consumers like Goel that form part of the 1.17-billion wireless telecom market are bracing for hikes in their mobile bills after over three years of enjoying ultra-cheap tariffs. Since Jio's entry in September 2016, the telecom tariffs came down crashing. This has led to a significant impact on the financials of incumbent operators like Bharti Airtel and Vodafone Idea.

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Incumbent telcos which were barely struggling to operate got a big blow recently when the Supreme Court ruled in favour of (Department of Telecommunications (DoT) in a 16-year-old AGR (adjusted gross revenues) dispute. The Rs 1.47-lakh crore AGR blow has punched a hole in the pockets of telcos who reported record losses in the September quarter. Vodafone Idea, the largest operator in terms of subscribers, reported over 10 fold jump in net losses to Rs 50,921.9 crore, the highest in the corporate history of India. Airtel too reported net losses of Rs 22,830.1 crore in the same quarter. This left the already-strained telcos with no other option but to increase tariffs.

Telcos also understand that consumers don't have other options but to pay higher tariffs. The low tariffs over the past three years have made consumers habitual to using excessive amounts of data for personal and business purposes. Data consumption, for instance, has risen from 240 megabytes per user in July-to-September 2016 to 9.77 gigabytes per user in April-to-June 2019 - a 42-fold rise. It's difficult to reduce the data consumption for end users even if there's a hike to the extent of 40 per cent. Though some experts believe that the latest hikes would have an effect on the data consumption pattern.

ALSO READ:Airtel, Reliance Jio, Vodafone Idea tariffs: Who has increased how much?

The impact of the recent hikes will be felt by prepaid consumers as postpaid consumers will continue to pay the same tariffs as before. As per TRAI, over 95 per cent of the wireless market comprises prepaid users who, on an average, pay about Rs 66 per month to telcos. In comparison, postpaid users pay Rs 253 per month. The reason for letting postpaid consumers off the hook is because these consumers have been resenting (for a long time) about having to pay more for the similar kind of services offered to prepaid subscribers.

"Telecom sector was reeling under multiple problems such as low tariffs, regulatory issues including AGR liability, cash burn, and stretched balance sheet. We believe the just-announced tariff hikes of 15-40 per cent were much required and will likely remedy most of the problems of the industry," analysts at ICICI Securities said.

While justifying the tariff hikes, an Airtel spokesperson said that the tariff increases are in the range of a mere 50 paise per day to Rs 2.85 per day, which is not going to impact end consumers in a big way.

ALSO READ:Why Airtel, RIL, Vodafone Idea stocks rose up to 23% today

While the overall hikes are in the range of 15 to 40 per cent across different plans, the pricing in the most popular 84 days unlimited plans has been increased by 31-33 per cent. In terms of comparison between new and old tariffs, users who go for minimum plans and yearly bundled plans are going to be worst affected as they will have to shell out 40-41 per cent more to get the same kind of services.

But that's not the end of it. Experts are predicting more hikes in the days to come. Analysts at Emkay said that "data stickiness through content consumption will be proven with tariff hike absorption by subscribers and should also pave the way for incremental tariff revisions." Analysts at Axis Capital hold a similar view. "Though the quantum of price hike is still not enough for sustainability of Vodafone Idea, the trend reversal opens scope for another round of price hike," said Axis Capital in a December 2 report.

The experts have also come to believe that the tariff hikes would be in two stages - one by the operators themselves, which will be followed by TRAI setting up floor prices for both voice and data services. The current phase is the one where the operators have announced hikes without assistance from the regulator. It's anticipated that TRAI would soon float a consultation paper on the new pricing mechanism.

ALSO READ:Your voice call rates may soon rise 67%; data to get 20% dearer

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