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After 5G auction, analysts expect telecom firms to increase rates again

They say tariff could be raised even for 4G services in a bid to increase 5G adoption

5G auction | Telecom companies | telecom services

Aneesh Phadnis  |  Mumbai 

The move will benefit companies as their cash requirement would come down. It will unblock the cash of telecom operators that they keep with banks to furnish bank guarantees.
Telecom companies acquired 51,236 MHz of spectrum worth over Rs 1.5 trillion across various bands.

Telecom sector analysts expect another round of tariff hikes following the Rs 1.5-trillion auction of 5G spectrum, which concluded on Monday.

“Given the sizeable investments towards spectrum acquisition, we believe will charge differential pricing for 5G services. Indeed, adoption of 5G services will hinge on the extent of premium over 4G tariffs. In a bid to ensure mass adoption of 5G, may raise tariffs for 4G services, too, despite two rounds of major tariff hikes effected in December 2019 and November 2021, respectively. We expect another tariff hike for 4G services in the second half of the current fiscal,” said Manish Gupta, senior director of .

acquired 51,236 MHz of spectrum worth over Rs 1.5 trillion across various bands. Reliance Jio came out on top in the auctions, purchasing spectrum worth Rs 88,078 crore. Bharti Airtel and Vodafone Idea purchased spectrum worth Rs 43,084 and Rs 18,799, respectively.

Nomura Global Markets Research estimates that telecom service providers would require a modest 4 per cent incremental tariff hike on their overall subscriber base or a 30 per cent premium over 1.5 GB/day 4G plans, following the spectrum acquisition.

The government has removed spectrum usage charges (SUC) for all spectrum purchased after September 2021 and Nomura estimates that with the large SUC savings, the net annual outlay for companies would be around Rs 7,500 crore.

“Historically, Indian telecom companies have refrained from charging a premium for 4G plans (vs 2G/3G data plans). With potentially higher speed on offer and likely initial uptake from premium customers (smartphones above Rs 15,000), there is a potential for telecom companies to charge a premium for 5G (vs 4G), in our view. 5G tariff plans would be a key monitorable in the near term, and 5G premium (vs 4G) may provide the next leg of ARPU (average revenue per unit) uptick for the telecom companies,” Nomura said in its report.

According to Goldman Sachs Equity Research, 5G rollouts have not resulted in any meaningful uptick in capex for telecom companies globally, and it foresees a similar trend in India.

“We continue to expect a tariff hike before the end of [calendar year 2022] and view that as a next catalyst for the sector,” Goldman Sachs said.

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First Published: Tue, August 02 2022. 13:21 IST