Telecom tides rise: Price hikes to boost capital returns

With telecom operators raising prices by 10-25% across prepaid and postpaid plans, analysts projec a net impact of USD 5.5 B within a year

- VERNIKA AWAL

In the last week of June, following the government's latest round of 5G spectrum auctions, which fetched the government's coffers just over USD 1.3 billion, each of the three telecom operators-Bharti Airtel, Reliance Jio, and Vodafone Idea-raised their respective tariffs across all prepaid and postpaid services for consumers.

The tariff hikes triggered by the three ranges between 10% and 25%, a fairly substantial amount. Even as consumers expressed displeasure, the three companies argued that raising the tariffs was key to increasing the average revenue per user and, in turn, ramping up profitability.

Before proceeding further, it is important to understand why telcos have repeatedly stated that a new tariff is important for their financial health. India's telecom operators have long complained about a highly predatory market that made the country one of the least expensive geographies in terms of the overall cost of data.

The formal launch of Reliance Jio in 2016 mostly changed how telecom plans were priced, removing charges and limits on outgoing voice calls and drastically lowering the cost of mobile data.

This led to a boom in the user base of India's telecom operators, coupled with consolidation of telecom operators. Data published monthly by the Telecom Regulatory Authority of India (TRAI) indicates that India had 1.01 billion mobile network connections as of the end of 2015, before the advent of Reliance Jio.

Bharti Airtel had the biggest market share in a market with 12 recognised telecom service providers (TSPs), with over 243 million users. Vodafone India and Idea Cellular were the next biggest TSPs, with 193 million and 172 million users, respectively.