At 10-20%, telecom tariff hikes in 2022 expected to be lower than in 2021

Tariffs are hiked by telcos to maintain a healthy average revenue per user (ARPU)

Owing to inflationary pressures, tariff hikes by telecom operators in 2022 are likely to be lower than in 2021, according to a report in the Financial Express (FE). This comes at a time when nearly all telcos in India are aiming to launch 5G services before the end of 2022. 

In November 2021, the companies announced tariff hikes of 20-25 per cent. In 2022, according to FE, the hikes may lie between 10-20 per cent. Also, the hikes may get slightly delayed. 

"We expect the next leg of tariff hikes in the next 6-12 months. A delay in tariff hikes by the telecom companies is expected largely due to weak consumer sentiment on inflationary pressures," Nitin Soni, senior director at Fitch Ratings told FE. The agency maintained a stable outlook on the Indian telecom sector. 

Tariffs are generally hiked by telcos to maintain a healthy average revenue per user (ARPU). According to FE, currently, the industry ARPU in India is around Rs 162 per month. Higher ARPU is important to make profits.

In India, the tariff is among the lowest in the world. The average price of 1GB data is Rs 14 in India. The market was disrupted by the entry of Reliance Jio in 2016, which offered unlimited internet and calling. 

Other companies like Bharti Airtel and Vi are struggling to maintain margins amid a falling user base. They have reiterated that they will not shy away from hiking the tariff rates to maintain profitability. 

"Though the industry needs tariff hikes, the telcos are indirectly bound by the government to keep the services affordable and that may prompt them to not hike the tariffs beyond 15 per cent for prepaid plans," a Mumbai-based analyst told FE. 

He, however, said, that the companies may hike tariffs on the postpaid plans this time by about 20 per cent.