The “acche din” (good days) of cheap tariffs may be ending for Indian mobile phone users.
On November 22, India’s second-largest telecom company, Bharti Airtel, announced a hike in tariffs for its prepaid customers. A day later, Vodafone Idea, or Vi, followed suit.
“The increases indicate a fundamental shift towards higher overall user tariffs,” said Tushar Shah, director at research and analytics firm CARE Advisory. “These will enable telcos to invest in capital expenditure to improve existing network quality as well as future investments towards 5G network.”
The increase has been around 20% on average, with entry-level plans now costing around 25% more. The move, while necessary for the companies struggling for survival, will increase the burden on consumers.
Following the hike, the cheapest Airtel or Vodafone plan, including data, will cost Rs 99 – it stood at around Rs 75 earlier.
Over the years, India has had among the world’s 30 cheapest average call and data rates. As of August, the least expensive was in Israel at $8, as per Cable, an internet comparison platform. India had the 28th spot.
The companies have not surprised industry analysts with the tariff hike. Some believe it was inevitable given their precarious finances, particularly since Reliance Jio’s arrival in 2016.
For the September quarter, Airtel reported a loss of Rs 763 crore. Likewise, Vi reported a consolidated net loss of Rs 7,132 as compared to Rs 7,218 crore in the last year period.
“Mobile tariffs in India have been economical and lower than global benchmarks but are not sustainable for the stressed telcos…the tariff hike was long overdue and Airtel took the lead in rebalancing its tariffs,” explained Charu Paliwal, research analyst at market research firm Counterpoint Research. “Vodafone Idea has always maintained tariff hike is absolutely needed and it may help the telco in its fund-raising process.”
However, the firms’ average revenue per user, a major area of focus for them going forward, has been constantly improving.
“The telecom industry is gathering pace towards increasing overall user tariffs to achieve the average revenue per user levels of around Rs 200 over the medium term. The current average revenue per user of the top three telcos had averaged at Rs 135 for the quarter ending September 2021,” Shah of CARE Advisory pointed out.
For Reliance Jio, on the other hand, the average revenue per user has been on a slide, though the Mukesh Ambani-led firm is already making huge profits and remains the market leader.
Experts believe Reliance Jio will now play on the price hike by rivals, which is likely to boost its already strong customer base of around 40 crore.
Newly-migrated users, though, could be in for a shock as Reliance, too, will eventually take the tariff-hike path, warn analysts.
Paliwal suggests, however, that given Reliance’s growing footprint in the internet space and its revenues, besides its expanding rural presence, a price hike may not dent it much.
“It would be a boost for the whole sector,” he said.
This article first appeared on Quartz.