ALAS, the three-year-long honeymoon with dirt-cheap call rates and data cost is coming to an end in the country. During this period, landlines were virtually forgotten, data consumption reached stratospheric levels and the smartphone became the window to the world. Now, it’s time to wake up and smell the coffee – the new call charges.
Delhi-based Hitesh Goel runs an event management company with over 14 employees. He reimburses the mobile recharges of his employees, who use Jio prepaid connections, every month. Goel says that his mobile bill has gone up over 20% recently when Jio asked its subscribers to do top-up recharges for off-net calls. Off-net calls are what a subscriber of one telecom provider makes to the subscriber of another telecom network – like a Jio customer calling an Airtel number. Though the impact of the recent tariff hikes is still unknown – since Jio has not revealed the quantum of its increase unlike Vodafone Idea and Airtel – Goel is preparing for another 40% jump in costs (as indicated by Jio in a statement on December 1).
“I ported all of my colleagues from Vodafone Idea to Jio about eight months ago because Jio was cheaper and the services were better. I accept that the tariffs were low but it helped me reduce the overall business costs,” he says.
HIKES & MORE HIKES
Consumers like Goel who make up the 1.17-billion-subscriber wireless telecom market are bracing for sharp hikes in their mobile bills after over three years of enjoying ultra-cheap tariffs. Since Jio’s entry in September 2016, the telecom tariffs came down crashing. This has led to a significant impact on the financials of incumbent operators like Bharti Airtel and Vodafone Idea.
While the overall hikes are in the range of 15 to 40 per cent across different plans, the pricing in the most popular 84 days unlimited plan has been increased by 31-33 per cent. In terms of comparison between new and old tariffs, users who go for minimum plans and yearly bundled plans are going to be worst affected as they will have to shell out 40-41 per cent more to get the same kind of services. But that’s not the end of it.
Experts are predicting more hikes in the days to come. Analysts at Emkay said that “data stickiness through content consumption will be proven with tariff hike absorption by subscribers and should also pave the way for incremental tariff revisions.” Analysts at Axis Capital hold a similar view. “Though the quantum of price hike is still not enough for sustainability of Vodafone Idea, the trend reversal opens scope for another round of price hike,” said Axis Capital in a December 2 report.
Experts say that tariff hikes would be in two stages – one by the operator themselves, which will be followed by TRAI setting up floor prices for both voice and data services. The current phase is the one where the operators have announced hikes without assistance from the regulator. It’s anticipated that TRAI would soon float a consultation paper on the new pricing mechanism
WHY TELCOS ARE BLEEDING
Incumbent telcos which were struggling to operate got a big blow recently when the Supreme Court ruled in favour of DoT (Department of Telecom) in a 16-year-old AGR (Adjusted Gross Revenues) dispute. The Rs 1.47-lakh crore AGR blow has punched a hole in the pockets of telcos who reported record losses in the September quarter. Vodafone Idea, the largest operator in terms of subscribers, reported over 10 fold jump in net losses to Rs 50,921.9 crore, the highest in the corporate history of India. Airtel too reported net losses of Rs 22,830.1 crore in the same quarter. This left the already strained telcos with no other option but to increase tariffs.
Telcos understand very well that consumers nowadays are so dependent on data that they will not flinch at paying higher tariffs. The low tariffs over the past three years have got them addicted to using excessive amounts of data for personal and business purposes. Data consumption, for instance, has risen from 240 megabytes per user in July-to
September 2016 to 9.77 gigabytes per user in April-to-June 2019 – a 42-fold rise. It’s difficult to reduce the data consumption for end users even if there’s a hike to the extent of 40%. However, some experts do believe that the latest hikes would have an effect on the data consumption patterns.
THE IMMEDIATE IMPACT
The impact of the recent hikes will be felt by prepaid consumers as postpaid consumers will continue to pay the same tariffs as before. As per TRAI, over 95% of the wireless market comprises prepaid users who, on an average, pay about Rs 66 per month to telcos. In comparison, the postpaid users pay Rs 253 per month. The reason for letting postpaid consumers off the hook is because they have been resenting (for a long time) about having to pay more for the similar kind of services offered to prepaid subscribers.
“Telecom sector was reeling under multiple problems such as low tariffs, regulatory issues including AGR liability, cash burn, and stretched balance sheet. We believe the just announced tariff hikes of 15-40% were much required and will likely remedy most of the problems of the industry,” analysts at ICICI Securities said. While justifying the tariff hikes, an Airtel spokesperson said that the tariff increases are in the range of a mere 50 paise per day to Rs 2.85 per day.
Source – India Today