Bharti Airtel, Vodafone Idea and Jio Could Raise Tariffs Very Soon as Trai Considers Floor Pricing

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The telecom industry in India has come under undue stress since the data tariff war broke out. However, recently owing to some of the new hurdles that have come up, the companies in the telecom sector are on the verge of another major financial pit. The Supreme Court, last week, passed its decision on the matter of the Adjusted Gross Revenue (AGR), which was a pending matter since more than a decade and a half. The new decision means that the telecom industry is now looking forward to dues worth more than Rs 80,000 crore or even upwards of Rs 1 lakh crore on the account of penalties, interest, spectrum usage fees and license fees. But, with all this happening in the industry, an ET Telecom report on the matter has highlighted that the government might be backing up the telecom operators to provide some relief to the ailing industry. This essentially means Reliance Jio, Bharti Airtel and Vodafone Idea may hike tariff prices in the coming months.

Telcos Have to Pay Dues Worth More Than Rs 1.3 Lakh Crore

As per the update, the Cabinet Secretary Rajiv Gauba-headed Committee of Secretaries will be taking a look at the troubles being faced by the industry. The burden which the telecom operators face might be north of Rs 1.3 lakh crore as per the informal estimates. A source from the Department of Telecommunications (DoT) has said, “The Committee of Secretaries (CoS) is expected to meet shortly and submit their recommendations in a time-bound manner.” As per the source, the Cabinet Secretary will comb through the order and will examine all the aspects and will likely come up with solutions which will be plausible to be worked out for providing relief to the telecom industry which remains under immense financial burden.

As part of the steps which the government will take to bring relief to the telecom industry, the Telecom Regulatory Authority of India (Trai) has been asked to recommendations about floor pricing in the industry. The floor pricing would set a lower limit for the tariffs in the industry to avoid the tariffs in the industry from falling to stooping low levels. Mainly in the last two years, the data tariff war has eroded the tariff and the predatory pricing in the industry has led to the falling of tariff levels for all the telecom operators, thus wiping out profits and creating voids in the balance sheets of these companies.

Trai to Examine Many Elements

Trai will be taking responsibility of examining all the aspects of minimum charge for voice and data services which would ensure that the telecom industry remains viable and robust. This new development comes after the Supreme Court order which is expected to further stress the telcos financially and most of the telecom operators have shown disinterest in the 5G spectrum auction which the government will hold next calendar year. The industry currently remains under more than Rs 7 lakh crore debt.

Telcos Could Make Reduced Contributions to USOF

According to the sources available, the high-level committee will also look for a chance to bring the option of spectrum payments deferment for the years 2020-21 and 2021-22 so that the telcos take a sigh of relief and have more buffer financially.

Even though the troubles for the telecom operators have increased because of the latest order from the Supreme Court, the government could rally to the support of the telecom operators which could help out the industry. Some of the steps that the Cabinet of Secretary could take to reduce the burden off the heads of the telecom companies might include a likely reduction in the Spectrum Usage Charges (SUC). The telcos’ contribution to the Universal Service Obligation Fund (USOF) can be also be brought down by the government to ease the situation of the telecom operators. The USOF is a corpus created to fund rural telephony and currently, it stands at Rs 50,000 crore. To gauge the financial situation of the industry, it is crucial to look at the average revenue per user (ARPU) of the industry which was previously pegged at Rs 174 in 2015, but following the entry of the Mukesh Ambani led telecom operator, Reliance Jio, three years back and the data tariff war, the ARPU has come down to Rs 113.

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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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