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

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.

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 Sharma

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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Arpit Sharma