Incumbent telecom operators Vodafone Idea and Bharti Airtel have announced tariff hikes starting December 1. This news comes at a time when the telecom sector has reported its worst quarterly performance ever.
The telcos, however, did not provide any guidance on how the hikes will be rolled out and which segments of the subscriber base will be impacted.
“To ensure its customers continue to enjoy world-class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019,” said the statement. It added that Vodafone Idea will continue to actively invest in making its network future-fit by embedding new-age technologies and launching new products/services to cater to the evolving needs of its over 300 million customers.
“The telecom sector is highly capital intensive with fast-changing technology cycles that require continuing investments. It is, therefore, extremely important that the industry remains viable to support the vision of Digital India,” said Bharti Airtel in a statement.
Mobile data charges in India are by far the cheapest in the world, even as mobile data demand has grown. From October 10 onwards, Reliance Jio started charging customers 6 paise a minute for making calls to any non-Jio mobile number.
This initiative came at a time when Jio already commands a bulk of the market share. The additional charge was introduced soon after the Telecom Regulatory Authority of India moved to reopen the deadline for ending charges for terminating calls on rival networks beyond January 2020. Analysts did not see this charge as a positive move for Jio’s subscriber sentiment. Vodafone Idea itself generated earnings before interest, taxes, depreciation, and amortisation of ~300 crore from net interconnection usage charge in the second quarter (Q2).
Vodafone Idea’s subscriber base slipped by another 9 million, at a reduced churn rate, during Q2 to 311.1 million (Q2 of 2018-19: 422 million). Average revenue per user (ARPU) was at ~107, compared to ~108 in the first quarter (Q1). Although the company reported better retention of 4G customers, it has fallen behind rivals Jio and Airtel in expanding 4G base. The operator has lost almost 110 million subscribers since October 2018, when it introduced minimum recharge plans to weed out low ARPU subscribers.
“Muted 4G subscriber additions remain a key concern for Vodafone Idea. Without any meaningful government support, Vodafone Idea’s survival appears to be at risk, which may result in the Indian telecom market moving to a duopoly (private operators), and opens up possibilities for Airtel subscriber additions to improve and even tariffs,” noted Rajiv Sharma, co-head of research, SBICAP Securities.
During Q2, Vodafone Idea added 5.5 million 4G customers (Q1 of 2019-20, it was 4.1 million), taking the overall 4G subscriber base to 90.3 million with increasing 4G net adds. Even data usage volumes, while improving, are still behind Airtel and Jio.
The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high level Committee of Secretaries headed by the Cabinet secretary is looking into providing appropriate relief. The company reported total liability of ~25,678 crore for adjusted gross revenue towards Department of Telecommunications, following a Supreme Court ruling.
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