Indian telecom operators are soon going to implement a tariff hike. The expected hike is before the end of FY23 or March 2023. Airtel has already tested a tariff hike in two circles by removing the base Rs 99 plan and making the Rs 155 plan as the new base option for consumers. This is an open invitation for the other telecom operators to join in as well. Telcos need money to expand existing digital infrastructure, which includes the fiberisation of towers and deploying small cells to aid with the 5G rollout. Spectrum costs in India are also pretty high, and the telcos would definitely need more airwaves from the upcoming auctions to deploy for both 5G and 4G. In addition, there is license fees that the operators have been requesting the government to cut down to 1% (but this hasn't happened so far).
Thus, the telcos would want to maximise their revenues. Otherwise, it is just a bad investment for the investors as R&D costs and operational costs will go up with the rollout of 5G, and thus, at the current level of tariffs, the telcos won't be able to make a justifiable return on their investment.
Airtel and Jio to Increase Tariffs by 10%?
Analysts at Jefferies suggest that the mobile bills for Indian consumers can go up by 10% very soon. In comparison, this would be lesser than the tariff hikes which took place the last two times in 2019 and 2021. According to a BusinessInsider report, the brokerage has suggested that Airtel and Jio will announce a 10% tariff hike at the end or last quarter of FY23, FY24, and FY25.
This means that every 12 months or so, the cost of consuming mobile services in India would go up. Compounded, the costs could feel too much for some consumers. Telecom services are a basic necessity in today's world. Thus, it would be a challenge for the telcos to find that optimum price point where they can maximise the revenues but also not burn the pockets of the consumers.
With another round of tariff hikes, Jio and Airtel would be able to pass through the Rs 200 average revenue per user (ARPU) figure. This is what has been the goal for Airtel in the short term. In the medium term, Airtel wants to surpass the Rs 300 ARPU figure.
