The latest news in the industry is about the tariff hike that has been done in the industry for the telecom subscribers. Most of the subscribers of prepaid services are not liking the tariff hike because it essentially means the end of the era of free unlimited calling, which was a feature which a lot of telecom operators boasted about. However, with this new tariff hike, there are not only changes in the prices of the prepaid plans, but also the benefits which the subscribers were getting. On the surface, this seems like a move of desperation on the part of the telecom operators, and the subscribers have all the reason to be a little angry at the tariff hike given the quantum of 40% increase. But, diving a little deep down on the details of this tariff hike and ideating about what the impact could be in the long term, there are some points that the subscribers might be missing. It is quite possible that the tariff hike which seems like it’s taking a lot of money out of the subscribers’ pocket might actually turn out to be a good move for them and for the industry as well but in a slightly longer term.
Financial Health of Industry
The first thing to note here is the poor condition of the industry, which has been one of the driving factors behind all the major moves by the telecom operators in the telecom sector. The tariff hike can be believed one of these too. Because of the immense pressure from the Supreme Court and the Department of Telecommunications (DoT), the telecom operators face dues worth of Rs 1.3 lakh crore and more combined from the AGR verdict. The new tariff hike will help these telcos to tackle these payments better, but then again, what do the subscribers gain in this?
Avoiding a Far-Sighted Monopolised Market Situation
The answer to this question lies in a situation of monopoly. The government has been very discerning on the matter of avoiding monopoly from a single telecom operator in the industry. But, if immense financial pressure falls on the telcos, then such a situation might become inevitable which would mean that a single entity would control the majority of tariffs and plan pricing, thus creating trouble for the subscribers.
New Technology Adaption and Better Services
Another reason why the subscribers will gain from the new tariff hike is because the new hike will allow the operators to deploy better network and new technologies in the near future. Currently, with impending payments in the horizon, and so many dues on the head of these companies, the telcos have not been able to prioritise network growth, new technology adaption and other areas and the focus was currently on sustenance rather than growth. But, the new tariff hike will bring in new revenue, which would allow these telcos to focus a little on growth as well.
Comparison With Global Data Rates
A third reason why telecom companies could justify the rise in tariff is the current levels of data prices. It can also be an issue of perspective, as well. The Cellular Operators Association of India (COAI) has already said that the global data average rate is $8.5 per GB. Even in India, almost a decade back, the subscribers used to pay Rs 333 per GB, but in 2018 and 2019, the subscribers were paying Rs 7.7 per GB which is much lower than what the other countries are paying for data. Calculating a 40% hike on this cost, the subscribers would still be paying only Rs 11 per GB, which is very affordable if compared to other rates. So, with these three reasons, we believe that although the new tariff hike might feel stingy in the short term, in the long term, it could be totally justified for the subscribers with new network technologies and services from the telcos.