Indian Telcos Understand the Risk of Full Scale Tariff Hike all at Once

The telcos do need a tariff hike soon so that they can get a better return on capital employed. But at the same time, the telcos understand the level of SIM consolidation that might take place if they hike the tariffs all at once. Thus, the telcos are likely to delay the hikes further or just increase prices in a phased manner.

Highlights

  • The Indian telecom industry is looking more stable now compared to what the situation was before the pandemic period.
  • Airtel has also started making profits, while BSNL has turned EBITDA (earnings before interest tax depreciation and amortisation) positive.
  • Vodafone Idea (Vi) is still struggling, but the threat of shutting down shop is gone as the government has converted the dues into equity for itself in the company.

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The Indian telecom industry is looking more stable now compared to what the situation was before the pandemic period. Airtel has also started making profits, while BSNL has turned EBITDA (earnings before interest tax depreciation and amortisation) positive. Vodafone Idea (Vi) is still struggling, but the threat of shutting down shop is gone as the government has converted the dues into equity for itself in the company. The next step for the sector to stabilise operations further and boost business would be to hike the prepaid tariffs.




But that's unlikely to happen in the same manner it did before. You see, earlier, the tariffs were so low that even if they were increased by a few percentages, it wouldn't have impacted the consumption pattern of the consumer. But now, given the inflationary nature of the global market, consumers would be very much careful before they spend a lot of money on purchasing mobile data or prepaid packs in general. Tariff hikes have not concerned the postpaid consumer base of the telcos, and it isn't even going to for the next few years. This is a topic for another day. For now, it is important to understand why this time, the tariff hikes won't likely be done in the same manner as before.

Read More - BSNL and MTNL Merger, is it Necessary

What Happened Before?

If we talk about the previous prepaid mobile tariff hikes that took place in December 2021, you will see that the mobile tariffs went up by 20% to 25%. This is how it happened in 2019 as well. Consumers were a little disappointed that they had to pay more for basically the same or lower amount of data. But it didn't affect consumption much. Indians still have multiple SIM cards because even though the tariffs were hiked, they are still at a level where most people can afford two SIMs comfortably.

But this time, the tariffs are already at a pretty high stage, and to hike them further all at once would impact the telecom subscriber count negatively in the country. The telcos wouldn't want to scare the customers away, especially when they are trying to get their attention with 5G.

Read More - Has BSNL Improved its Landline Services in the Last Few Years

What are the Telcos Going to Do?

From an industry standpoint, the telcos do need a tariff hike soon so that they can get a better return on capital employed. But at the same time, the telcos understand the level of SIM consolidation that might take place if they hike the tariffs all at once. Thus, the telcos are likely to delay the hikes further or just increase prices in a phased manner.

Airtel has already taken a baby step to hike tariffs by removing the Rs 99 plan as the base option for consumers in 17 circles and making the new base option the Rs 155 plan. It is a tariff hike done on a small scale, and it will definitely impact its revenues positively in the short term.

Implementing hikes in a phase-wise manner seems to be a better option for telecom operators at the moment. It will allow the consumers to get prepared mentally for paying more and wouldn't hurt the telcos' customer base hugely.

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Tanay is someone with whom you can chill and talk about technology and life. A fitness enthusiast and cricketer, he loves to read and write.

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