Recently, the Supreme Court dismissed the review petition of Airtel and Vodafone-Idea on Adjusted Gross Revenue (AGR) payouts. The two are staring at huge AGR payouts to the government. The analysts say that telecom companies would need to raise mobile tariffs in a bid to rebuild financial strength. There are the reasons why Airtel, Vodafone-Idea‘s troubles are bad news for customers.
Some analysts said that the actual timing of the next round of price hikes will depend on Vodafone-Idea’s survival. Vodafone-Idea has informed the Department of Telecom (DoT) that it will wait for SC’s decision on modification of AGR pleas. Also, the consumer spends on communications in India is said to be below Singapore, Malaysia, China/Hong Kong, the Philippines, Japan, Australia, the US, the UK, Germany, and France.
According to Bharti Airtel Chairman, Sunil Mittal, it’s essential that at least three players remain in the segment. “It’s a matter of survival,” he said after a meeting with the Telecom Regulatory Authority of India (TRAI).
Bharti Airtel, Vodafone Idea and Reliance Jio over a month ago increased prepaid tariffs by 14-33%. Rajiv Sharma who is the research head at SBICap Securities told ET that any upward revision in tariffs beyond 15% in the next 6-9 months may lead to falling in the number of mobile subscribers in the country.
“With Average Revenue Per User (ARPU) still well below the 180-200 ‘pre-Jio’ levels and a reduction in overall telecom-related consumer spending (as a percentage of GDP) over the past three years, there’s an adequate scope for telcos to raise tariffs by another 30% later this year,” said Sanjiv Bhasin, director at IIFL Securities to The Economic Times.