For anyone aware of the Indian telecom industry, he/she would understand the precarious situation it is in. Even the stalwart Reliance Jio which has been making the most profits faces the heat of the industry. The reason is the way the market has evolved. When Jio came to the scene, it drove down the prices of data very significantly. The other surviving telecom operators had no other option but to reduce the data rates as well. This meant that the average revenue per user (ARPU) for the operators dropped steeply.
Low ARPU and High Costs a Problem for the Telcos
The biggest problem right now for the telcos is low ARPU while their network deployment cost is increasing. With 5G, it would increase even further since the telcos will need new spectrum bands in their portfolio, new equipment, and would need to invest in more fiber networks in the medium term.
This is why the industry has been asking for an increase in tariffs. This will especially benefit Vodafone Idea (Vi) which is in a very tight situation. While the users might be a little disappointed, there’s no workaround for the fact that the telcos need a tariff hike soon to get a decent return on their investment.
Even during the pandemic, the operators didn’t get much relief or help from the government. In fact, the government won in the adjusted gross revenue (AGR) battle and is now looking forward to taking thousands of crores from the telcos.
With 5G on the way, the operators would want to increase the tariffs a little so that they can earn good money leveraging the next-generation network services. The data rates in India are one of the cheapest in the world while the data consumption rate by the users is right at the top. This pushes the operators to continuously upgrading their network infrastructure to ensure that their 4G networks can sustain the growing demand.