Vodafone Idea, Bharti Airtel May Not Get All the Help From Tariff Hike, Govt Might Need to Intervene

Vodafone Idea and Bharti Airtel tariff hike might bring a little bit of financial relief, but it won't suffice for the telecom operators in provisioning for the dues

Highlights
  • The telos might raise tariff by 15%
  • Reliance Jio has increased tariff by 14% through IUC
  • The tariff hike will help the telcos in increasing capex

The three major telecom operators in the Indian telecom industry, including Reliance Jio, Vodafone Idea and Bharti Airtel have announced the upcoming tariff hike. In a time where the industry remains laden with massive dues, and there is a lot of pressure on Bharti Airtel and Vodafone Idea, the move of raising the tariffs come as no surprise. However, as per a new ET Telecom report on the matter, SBICap Securities has said according to one of its recent findings that additional help will be required from the government’s side even when the telecom operators decide to hike the tariff of their plans by 15%. What the analysts have implied is that a 15% tariff hike would be insufficient for the telecom operators to bring relief for the new burden of dues which has come upon them after the announcement of the new definition of AGR by the Supreme Court.

bharti-airtel-vodafone-idea-hike

15% Hike Not Enough for Telcos

It is worth noting that since the last few days, starting with Vodafone Idea, Bharti Airtel and then Reliance Jio have all announced tariff hike citing investments in networks as the reason for their move. Vodafone Idea has said that the new hiked tariffs in the industry will go effective on December 1. On the sidelines, the Mumbai based investment firm has commented that with Reliance Jio increasing taxes essentially by 14%, there is headroom for other telecom operators to increase their tariffs by 15% as well. To recall, earlier this year, the Mukesh Ambani led telecom operator has introduced the IUC charges for its customers which charge 6 paise per minute from the subscribers to make calls to other networks. This IUC charge adds up to 14% of the overall tariff, thus translating into a hike. Since Reliance Jio has already made this move, this will allow the other telecom operators to hike their tariffs as well.

Government Relief Still Required for Telcos

The new move from telecom operators to hike their tariffs comes as the result of the new decision by Supreme Court passed on October 24 which changes the definition of the Adjusted Gross Revenue (AGR) to include non-core services as well. This change in the definition puts a new pressure on the telecom operators to pay up license fees and Spectrum Usage Charge (SUC) dues which now amount to more than Rs 1.4 lakh crore for all the telecom operators combined. Now, in a time where the balance sheets of the telecom operators are already under pressure, the tariff hike will help the telecom operators in provisioning for the dues which they have to pay in the next three months.

Tariff Hike to Help Telcos in Capex

As per the estimates rolled out by SBICap, let’s say if Bharti Airtel were to increase its ARPU by 15% based on tariff hike, then it would add Rs 19 to its ARPU, meaning that the annual influx for the telecom operator would include by Rs 5,800 crore, and for Vodafone Idea a similar rate increase would translate to Rs 16 on its current ARPU levels. This would mean that the Vodafone Idea balance sheet would grow by Rs 5,400 crore annually. But, as per the investment firm, the relief from the government would still be needed if the telecom operators are to continue investing in the 4G network. It would also help in boosting the capex of the companies.

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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Chetan- Gurgaon
Chetan- Gurgaon

Breaking::: so here it comes no relief in AGR dues for telcos. Only spectrum moratorium has been approved for worth 42000 crore for all three telcos together . No spectrum payments to be paid for yr 20 and 21. Govt put the onus of AGR deadline on Supreme Court as it has set the 3 months deadline and govt refuses to do anything . My view is it’s tough road for vil as they will have to deposit same amount to dot in three months as AGR dues which they got as relief from govt for 2 yrs

Nikhil
Nikhil

Same will go with Airtel. 4G expansion will be on hold.

Chetan-Gurgaon
Chetan-Gurgaon

Also i feel, when all telcos will raise price then only differentiating factor would be service quality to choose from. If a telco like VIL doesn’t promise QOS and network coverage then Customer will retaliate its price hike and will port to other operator. So jio and airtel will gain anyways. Lets see how much is the price hike and what effects it has on consumers.. My view is there hasn’t been any good news for VIL even in last 2 weeks even though Govt has given moratorium to telcos. If VIL has to survive then it needs to fix… Read more »

Kunal
Kunal

Expansion will not hold for Airtel. With existing low tariffs , their mobile revenues per quarter are 11000 crores with a net loss of some 1050 crores. If they increase mobile tariffs by 30% which Will happen so because of void , then Airtel will end up with a profit of 2200 crores per quarter . Note above profit is only mobile revenues . Airtel is in good profits for its subsidiary business like towers , DTH, international operations. Their total profits will see a huge upside . They may come out of agr loss in two to three years… Read more »

Prithvi
Prithvi

Valid point.

Kunal
Kunal

Government has helped voda/idea by hiking telecom tariffs. Government has given clear message to Jio for co-operating with avoid. There will be no competition on price front . At present – Void is working for the exact price increase required to break even , which will be submitted to the government. Unofficial floor price will be declared by government after examining by committee. All operators will have to follow that increased Tariffs. This may be for three years or more. Outcome will be positive for all struggling telecom companies specially void & BSNL. As per analysts – Tariffs may increase… Read more »

Priyansh
Priyansh

Incumbents want to pass on their AGR Burden to the Subscribers while Jio is passing their IUC Charges on to the Customers.

No wonder why yesterday, people were saying that Yeh Saare mil k humko pagal bana rahe hain. Well to be honest this is like an Overhead Cost, was bound to be recovered from the Customers.

BSNL FAN
BSNL FAN

Bhai subscriber or customer ek hi hai LoL 😛

Priyansh
Priyansh

Sir, I know this very well. I use them interchangeably along with consumers. I hope you don’t mind it.

Bsnlfan
Bsnlfan

Ok 😉

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