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

While the quantum of these hikes is not clear yet - telcos refuse to provide clarity - it is believed that they will move up in two phases, firstly by telcos themselves and then on TRAI's orders

twitter-logo Manu Kaushik   New Delhi     Last Updated: November 21, 2019  | 20:51 IST
Your voice call rates may soon rise 67%; data to get 20% dearer
Vodafone Idea, Airtel have announced tariff hikes from December 1, wheras Reliance Jio will raise charges in next few weeks

It seems the days of cheap data and free calls are over. The recent back-to-back tariff hike announcements by three private operators - Vodafone Idea, Bharti Airtel and Reliance Jio - have come at a time when the sector is going through its worst phase. Beginning December, incumbent telcos Vodafone Idea and Airtel will increase tariffs, while Jio could be raising its mobile charges over the next few weeks.

While the quantum of these hikes is not clear yet - telcos refuse to provide clarity - it is believed that they will move up in two phases. In the first phase, charges could be increased by telcos themselves. In the second round, the telecom regulator TRAI (Telecom Regulatory Authority of India) may ask telcos to increase their call and data charges - since TRAI is reportedly revisiting the floor tariffs mechanism. Under the floor price concept, TRAI may set minimum and (possibly) maximum tariffs for all operators.

ALSO READ:Reliance Jio to hike tariffs: Is this the end of honeymoon period for consumers?

As of now, the interconnect charges (IUC) - which are 6 paise per minute for mobile-to-mobile calls - act as a floor price but analysts say that they are far lower than the cost of terminating a call - a point that was raised by Airtel in its suggestion to TRAI last month. "The cost of completing a call is much higher than 6 paise per minute. Also, the cost of power, rental for the tower, and spectrum have nothing to do with whether there is an IP network or not," Airtel had said in its response to TRAI.

Similarly, data prices in India are presently one of the lowest in the world. The average cost of wireless data has gone down substantially since the entry of Mukesh Ambani-controlled Reliance Jio over three years ago. As per some estimates, mobile data costs anywhere between Rs 2.3 and Rs 6 per GB (gigabyte) in a bundled plan. This cost used to be Rs 226 per GB in 2015, as per TRAI.

ALSO READ:Reliance Jio takes cues from rivals, to hike tariff in few weeks

Analysts at brokerage SBICAP Securities expect TRAI to announce a floor price of 10 paise per minute (which is 67 per cent more than the current 6 paise per minute IUC charges), and data prices to be about Rs 3 per GB (which is about 20 per cent more than current lowest rate). In addition, analysts expect the minimum recharge plans rentals to go up by 40 per cent.

At the moment, Airtel's minimum recharge plan, known as Smart Recharge, is available at Rs 23 that offers prepaid subscribers to extend their validity by 28 days. Vodafone Idea's similar minimum recharge plan is for Rs 24. The reason incumbents could be comfortable raising minimum recharge tariffs is because Jio's minimum recharge plan - for just JioPhone users - costs Rs 59 for 28 days.

ALSO READ:Phone bills set to rise as Vodafone Idea, Airtel plan tariff hike from December 1

"Another factor worth watching is whether Jio matches incumbents on pricing or continues to operate 20 per cent below incumbents. If Jio decides to match others on pricing, Bharti and Vodafone may benefit from lower churn... Second stage is likely to be TRAI deciding on floor tariffs...where we see TRAI stepping in with supportive measures. It looks increasingly possible that the regulator may announce floor pricing on both voice and data, even though this sounds easier said than done given forbearance in place," SBICAP Securities said in a November 20 report.

The fresh need to increase tariffs has come when incumbents are struggling with distressed balance sheets and feeling constrained to invest in modernising their networks. The October 24 ruling of the Supreme Court on the AGR (adjusted gross revenues) issue has led to telcos taking the step towards tariff hikes.

Even though telcos have vouched for the government's Digital India mission in their official statements at the time of price hikes, experts argue that these moves could slow down the conversion rate of non-data subscribers into data users. Despite the substantial rise in the wireless data subscribers over the past five years, over 50 per cent of total wireless subscribers still do not avail data services.

ALSO READ:Reliance Jio may not be pleased with govt's spectrum moratorium to telcos; here's why

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