Urban Telecom Users in India Will Accept Tariff Hikes

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With India placed under multiple COVID-19 induced restrictions, the mobile subscription penetration in the country will now hit the 100% mark in 2025, says Deepa Dhingra, telecom analyst at GlobalData. In late March 2020, India was placed under an intense lockdown due to the COVID-19 pandemic. While the government eased certain restrictions in mid April and early May 2020, the majority of the restrictions were only eased in the Unlock phase of the lockdown. However, in the recent days, regional level lockdowns and various restrictions have been reintroduced in certain cities and districts across the country due to the surge in COVID-19 cases. GlobalData, a data analytics company earlier in late September 2020, said in a report that India’s mobile subscription penetration is “set to cross 100% mark in 2023 from 88.3% in 2020.”

India’s Mobile Subscription Penetration Crossed 87% in 2020

Dhingra on Thursday said that the company has “revised” its forecast made in September and has now “analysed the impact of COVID-19” restrictions on the telecom market in India.

“The new forecast indicates that the India's mobile subscription penetration will now reach 100% mark in 2025, while the mobile subscription penetration in India reached 87.1% by the end of 2020,” Dhingra told TelecomTalk in an email interview.

Dhingra said that the COVID-19 “pandemic has increased the dependency” on high-speed connectivity for tasks such as remote working, learning and entertainment.

“We believe mobile operators will continue to enjoy the increased demand for data services and would continue to invest in the expansion of mobile data networks to cover underserved areas,” Dhingra said.

In the September report, GlobalData said that the telecom service revenues will register an 9.1% compound annual growth rate (CAGR) between 2020 to 2025. However, Dhingra said that the services such as “bonus data and free talk time with extended validities” offered by the operators in the initial lockdown period has “impacted their average revenues per user (ARPU)” metric.

“We believe that mobile service providers will continue to yield lower ARPUs during 2021 as the pandemic persist,” Dhingra said. “Now we expect overall mobile service revenues will grow at [a] relatively slower CAGR of 5.3% during 2020-2025.”

Multiple analysts in the recent weeks have said that the telecom operators including Reliance Jio would need “tariff hike to sustain its earnings growth.” Similarly, the telecom operators including Vi, the third-largest wireless operator in India said that the “industry needs tariff hike.” While Vi said that it will “not wait for anybody else to take the first step” in hiking the tariffs, Bharti Airtel said that it will be “ready to take up tariffs if and when any player actually moves tariffs.”

“We believe that as the telecom service providers continue to invest in mobile network expansion to underserved areas and aim to introduce 5G services in India, the tariffs of mobile data services and therefore operators’ revenues will certainly increase over the coming years,” Dhingra said.

Crucially, the telecom analyst at GlobalData said that the telecom users, especially those in the urban areas will “accept” the hike in tariffs.

“Data service has proved to be an essential commodity during the pandemic,” Dhingra said. “The dependency on data services for working, learning and entertainment will push users to accept higher tariffs, particularly in urban centers.”

Reliance Jio Set to Maintain its Lead in Telecom Industry

In recent months, the Telecom Subscription Data as released by the Telecom Regulatory Authority of India (Trai) highlighted that Airtel has consistently added more users as compared to Jio. Airtel, the second-largest wireless operator in India is reported to have added 29 million active users since May 2020. However, Dhingra said that Jio will “continue to be the market leader in terms of subscriptions” between 2020 to 2025, despite “strong competition from Airtel.”

Meanwhile, Dhingra said that the Indian telecom operators are expected to launch 5G services commercially in 2023 with the company expecting the current 4G users to initially move to the next generation technology.

“The growing adoption of OTT video and social media applications and rising popularity of online working/learning, that require higher bandwidth, will fuel the demand for 5G services in India,” Dhingra said.

Crucially, the telecom analyst at GlobalData said that the 5G services would be offered as “premium service” with the operators pricing it at “double the cost” of 4G services in the initial days.

“However, operators are likely to bring down the tariffs eventually with the expansion of 5G network coverage and to drive its increased adoption,” Dhingra said.

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Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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