Airtel, Jio, Vi High Spends on 5G Spectrum Warrant Short-Term Tariff Hike: ICICI Securities

ICICI Securities said in a note that high spending from the telcos in the spectrum auctions warrants a tariff hike in the near term. This might not be a shocker for people following the Indian telecom industry. Telcos, including Airtel and Vodafone Idea, have been very vocal about their intentions to raise tariffs again by the end of CY2022. 

Highlights

  • Airtel, Jio, and Vodafone Idea (Vi) all spent a ton of money on the 5G spectrum auctions.
  • But while 5G brings excitement to the table, it also brings some bad news for you as a consumer.
  • The telcos will also benefit from the fact that there is zero SUC (Spectrum Usage Charge), and the 3% floor rate has also been abolished.

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Airtel Jio Vi

Airtel, Jio, and Vodafone Idea (Vi) all spent a ton of money on the 5G spectrum auctions. The telcos have made strategic purchases for the kind of money that the analysts didn't predict they would spend. But since the spectrum auctions are over now, there are many things in the clear now. The telcos aren't looking to hold back. Mostly, 5G services would arrive in India by October. Telecom operators have already made their networks ready for upgrading to 5G; they were just waiting for the spectrum.

But while 5G brings excitement to the table, it also brings some bad news for you as a consumer. It might not be so bad for everyone, but for low-income groups, this is not something they would like to hear.

ICICI Securities said in a note that high spending from the telcos in the spectrum auctions warrants a tariff hike in the near term. This might not be a shocker for people following the Indian telecom industry. Telcos, including Airtel and Vodafone Idea, have been very vocal about their intentions to raise tariffs again by the end of CY2022.

How Big Will be the Tariff Hike?

This time, however, there's no clarity on how big the tariff hike would be. ICICI Securities, though believes that the telcos will go for a 15% tariff hike in the near term. This would be to compensate for the cash outflows during the 5G spectrum auction. The telcos will also benefit from the fact that there is zero SUC (Spectrum Usage Charge), and the 3% floor rate has also been abolished. Jio and Airtel will be able to save at least Rs 2,200 crore and 2,000 crore because of this, said ICICI Securities.

The analyst said that industry use cases of 5G are still at least three years away in India, and thus the telcos would like to get more revenues out of their customers.

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