Indian telecoms firms hike prices as they fight to remain viable

NEW DELHI –  Indian telecoms users have enjoyed some of the world’s cheapest tariffs in recent years, which has led to rapid adoption of the Internet in the world’s second most-populous country. 

But this has been at the cost of the country’s telecoms operators, who bled profusely in a hyper-competitive environment marked by ultra-low tariffs and considerable losses.

A course correction is now under way as operators raise tariffs to remain in business and repay debts, including billions of rupees owed to the government for the use of spectrum.

India’s three key private telecoms operators – Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea – announced tariff hikes, including those of entry-level pre-paid plans, by around 20 to 25 per cent – all of this within the span of about a week beginning Nov 22.

This is the second industry-wide hike since December 2019.

It signals a growing realisation that the current average revenue per user (ARPU) is unsustainable and that boosting operating incomes is necessary as telecoms firms seek to grow and invest in newer technologies.

“The price hike should be looked at as a business continuity measure because the firms have to run a sustainable business and offer quality services,” said Ms Charu Paliwal, an analyst with Counterpoint Research, a global industry analysis firm. “This is exactly what the industry needs right now.”

She added: “Banks and investors are not going to invest if there are no returns in this business, which could ultimately decimate the ability of telecom operators to invest in newer technologies and grow.”

The monthly ARPU for wireless service in the April to June quarter this year was 104.66 rupees (S$1.90), down from 126 rupees in the same corresponding period in 2015. Prior to the 2019 hike, it was as low as just 70.13 rupees in the quarter ending December 2018.

Revenue has fallen primarily since the launch of Jio in September 2016. Backed by Asia’s richest businessman Mukesh Ambani, its offers of unprecedented low tariffs unleashed a price war that obliterated smaller rivals and forced two key survivors, Vodafone and Idea Cellular, to merge.

The number of operators has fallen from more than 10 in 2015 to just five major ones. The other two operators are state-run loss-making entities.

Jio’s private rivals have also been reporting losses – while Bharti Airtel reported a net loss of more than 150 billion rupees in financial year 2021, Vodafone Idea notched up more than 462 billion rupees in net loss in the same period.

India’s data prices are among the world’s lowest, averaging 93 Singapore cents for 1GB of data. PHOTO: AFP

There are indications of more tariff hikes. Last month, Bharti Airtel’s chief executive Gopal Vittal stressed the need to increase his firm’s ARPU to go up from around 153 rupees now to 300 rupees in the long run.

Ms Paliwal said: “We can expect more rounds of tariff hike as ARPU levels need to meaningfully move up for a sustainable business and eventually enable operators to invest in 5G technology.” 

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India’s data prices are among the world’s lowest, averaging 68 US cents (93 Singapore cents) for 1GB of data, according to, a platform that compares mobile and broadband prices.

Much of the buzz around the phenomenal adoption of the Internet in India has been driven around access to cheap smartphones and data.

The number of active Internet users is slated to increase from around 622 million in 2020 to more than 900 million by 2025, a report released by consulting company Kantar and the Internet and Mobile Association of India showed in June this year.

While 67 per cent of the urban population are active Internet users, this figure is just 31 per cent in rural parts of the country, underlining significant room for growth in the latter.

But could the trend of price hikes derail the pace of Internet adoption, especially in rural India, where customers are more price-sensitive?

The number of active Internet users is slated to increase from around 622 million in 2020 to more than 900 million by 2025. PHOTO: AFP

Mr Biswapriya Bhattacharjee, executive vice-president of the Insights Division at Kantar, is not overly worried. “I don’t think we are going to see a slowdown in the rate of Internet adoption. What we might see, and I think it will be a temporary blip, is that maybe the duration of usage might come down to possibly balance the amount an individual is spending currently,” he told The Straits Times.

With growing dependence on the Internet to access not just entertainment or news but also vital government services, cost of data, he argued, has become an essential part of household budgets today.

“You will, of course, cut ends in very difficult circumstances, but you will not exit the category entirely,” Mr Bhattacharjee added.

Major telecoms players in India and their user base as at June 2021.

(Figures in brackets indicate market share*)

Reliance Jio: 440.59 million (36.64 per cent)

Bharti Airtel: 357.05 million (29.69 per cent)

Vodafone Idea: 273.88 million (22.77 per cent)

Bharat Sanchar Nigam: 122.88 million (10.22 per cent)

Mahanagar Telephone Nigam: 6.15 million (0.51 per cent)

* Table does not include all telcos in India

Source: Telecom Regulatory Authority of India

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