Vodafone Idea, Airtel Should Avoid Tariff Hikes: Opinion

Higher tariffs would allow the cash-strapped telecom operators in working more flexibly and also pay off their debt faster. Both Vi and Airtel owe thousands of crores to the Department of Telecommunications (DoT) in adjusted gross revenue (AGR) dues.

Highlights

  • Jio wouldn’t be evil if it doesn’t go for tariff hikes right away
  • It is super strange to see Bharti Airtel losing subscribers
  • Apart from Jio, neither of the telcos added any subscribers

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Vodafone Idea

Vodafone Idea (Vi) and Bharti Airtel are going to go for tariff hikes soon. But neither of the telcos should be too jumpy about it after looking at the Telecom Regulatory Authority of India (TRAI) monthly report for May 2021. Apart from Jio, neither of the telcos added any subscribers. In fact, both Vi and Airtel, who are planning to go for tariff hikes, lost more than 4 million subscribers each. At a point when the telcos are not adding new subscribers, increasing tariffs would mean only one thing - a higher subscriber churn rate.

Why Are Airtel and Vi Looking to Increase Tariffs?

Higher tariffs would allow the cash-strapped telecom operators in working more flexibly and also pay off their debt faster. Both Vi and Airtel owe thousands of crores to the Department of Telecommunications (DoT) in adjusted gross revenue (AGR) dues.

One thing is clear, neither of the telcos would want to go for tariff hikes alone because of the high risk of increasing subscriber churn rate. Even if they both go for tariff hikes and Jio doesn’t, it would still result in a negative.

The dilemma is that Vodafone Idea needs high average revenue per user (ARPU) desperately so that it can increase its overall profits. The telco had previously said that looking at the current market condition, no new investor wants to jump in.

Basically, Vi was saying that the industry needs a tariff hike so that investors can see their money coming back to them. Even Vi is continuously investing in expanding the reach of its networks so that customers around India can enjoy the true power of 4G.

However, with huge debt on its shoulders, no profits, and subscriber loss, the telco doesn’t have a lot of time to make a decision. It needs its customers to pay more so that it can generate the cash flow to operate the business until the time it can secure an investor.

Airtel Losing Subscribers Is Not a Good Thing

After the spectrum deployment and improvement in networks, it is super strange to see Bharti Airtel losing subscribers. In a bid to earn more, the telco might go with tariff hikes, but it wouldn’t look good given its performance in the month of May 2021. Further, Bharti Airtel wouldn’t want to lose out its market share to Reliance Jio even further.

There’s one thing to consider here; Reliance Jio is in a very commanding position. The telco can wait for tariff hikes even further and let Vodafone Idea and Bharti Airtel figure out how they can succeed. Or, Jio can also improve its ARPU by increasing tariffs with Airtel and Vi and also provide relief to the industry in the short term.

Jio wouldn’t be evil if it doesn’t go for tariff hikes right away. It is a business at the end of the day which wants to add more subscribers and gain a larger market share. Regardless, if Airtel and Vi go for tariff hikes right now, it will be bad for them in the short term.

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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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