As Telcos prepare to hike tariffs, is the era of cheap data & calling over?

Telecom giants have announced an increase in their tariffs. Among them, Vodafone-Idea is set to increase in the range of 22 per cent to 67 per cent, Airtel by 14 per cent to 40 per cent and Reliance Jio will introduce new ‘all-in-one’ plans with a hike of up to 40 per cent.

From when will the hike be applicable?

On Sunday, Vodafone Idea said that its new plans for its prepaid products and services would be available across India, starting from 3rd December.

Speaking of Reliance Jio, the company would introduce new plans with unlimited voice and data, from December 6, 2019. These plans will have a fair usage policy for calls to other mobile networks.

“Although the new all-in-one plans will be priced up to 40 per cent higher, staying true to its promise of being customer-first, Reliance Jio customers will get up to 300 per cent more benefits,” Reliance Jio said in a release.

If you are wondering, why these telcos are increasing their tarrifs, after providing affordable, unlimited calling and internet services for so long, here's why:

After reporting massive losses in the second quarter (Q2) after an adverse Supreme Court (SC) ruling on adjusted gross revenue (AGR) issue, the companies decided to increase data charges.

Bharti Airtel reported a pre-tax loss of Rs 31,334 crore for the quarter ended July-September (Q2) after the company provided for outstanding payments to the central government on account of the SC judgment on AGR. The pre-tax loss in the year-ago quarter stood at Rs 1,998 crore.

Whereas, Vodafone Idea reported a massive pre-tax loss of Rs 36,959 crore in Q2 after it provided for payments related to AGR. The company took a hit of Rs 30,774 crore (including AGR) for the quarter. This led to a loss of Rs 50,922 crore at the net level — the highest-ever for an Indian company. The company had posted a loss of Rs 4,974 crore in the year-ago quarter, while the loss in the April-June quarter was Rs 4,874 crore.

In a massive blow to telecom companies, the apex court, on October 24, allowed the central government to recover Rs 92,641 crore in AGR from telecom operators, including Bharti Airtel, Vodafone Idea, and Reliance Jio, which together account for over 90 per cent of India’s 1.18 billion mobile subscribers, and having a market share of around 30 per cent each.

The apex court ordered the telecom companies to pay as much as Rs 1.4 trillion in past statutory dues after considering non-telecom revenues for their calculation.

The companies are seeking waiver of interest and penalties on the dues and extended payment timelines instead of three months mandated by the SC.

So, is the government doing anything to provide relief to the economically slumped sector?