Increasing telecom tariffs

Operators must not leave those looking for basic services

There are signals of a possible telecom-tariff increase over the coming weeks or months. With telcos resisting any significant rise for two years now, it’s perhaps time for the industry to go for tariff rationalisation in order to monetise their 5G services and demonstrate stronger business performance. Such a step should enable the industry to bring about cutting-edge innovation to cater to its customers in a much better way. With the looming spam and cybersecurity threat, telecom companies need to make focused investment to be able to serve consumers in a seamless manner, especially at a time of artificial intelligence (AI) and rapid changes in the tech space.    

 

Higher tariffs will invariably push up the average revenue per user (Arpu) — a proven performance metric for the telecom industry. From the last tariff increase in July 2024 to now, Arpu in a month has remained above ₹190 but below ₹200. The latest financial results put Bharti Airtel’s monthly Arpu on top at ₹264, ahead of industry leader Reliance Jio’s ₹216. The third private telco Vi (Vodafone Idea) is much below at ₹177 while state-owned Bharat Sanchar Nigam Ltd (BSNL) remained at the bottom with a little over ₹100. The trigger for a likely tariff increase is an announcement by Jio, which recently filed a draft red herring prospectus (DRHP) for an initial public offering (IPO), that it would retain the entry-level daily unlimited data plan at ₹299 and reintroduce Jio Prime membership at a one-time fee of ₹300. As one-time membership offers protection against any price change till September next year, the move is being interpreted as a sign of a headline tariff rise sometime soon. Jio’s announcement came quickly after Bharti Airtel discontinued its entry-level plan at ₹299 amid the ongoing commentary emphasising a tariff correction. The two leaders, through their different strategies, have indicated a changing tariff regime.

 

Against the backdrop of only three tariff increases since 2019, the narrative around the upcoming revision is being watched with interest. Over the years, India’s telecom tariffs and, therefore, Arpu, have been among the lowest in the world. Bharti Airtel Chairman Sunil Bharti Mittal, who has been an advocate of a higher Arpu of around ₹300 for long,  at an investor call earlier this year set a new ambition of a monthly Arpu of ₹350. This is required in a telecom industry that has faced significant financial stress and still runs the risk of becoming a duopoly. In that scenario, an improved return on capital is a necessity in the long run. Once seen as one of the most promising sectors in India with international players lining up to be part of it, the telecom industry has witnessed many upsets over the years. The cancellation of multiple telecom licences in 2012, after the alleged 2G scam, was the biggest setback.

 

While a stronger Arpu should enable the industry to make robust investment in futuristic technologies and serve the customer better, tariff rationalisation must keep in mind those subscribers looking for affordable services. This is especially for the under-served markets and rural India. The latest data from the Telecom Regulatory Authority of India (Trai) shows wireless (mobile) teledensity in rural India at only 59.46 per cent, with plenty of room for growth, but affordability will be the key.