India’s billion-plus mobile phone users may have to pay up to 30% higher for their mobile bill by end-2020 as telcos may hike prices again with their average revenue per user (ARPU) still remaining low and overall telecom-related consumer spends in India amongst the lowest globally.
Worth mentioning here is that Vodafone Idea and Bharti Airtel are required to make huge payouts after they got no relief from the Supreme Court on their adjusted gross revenue (AGR) dues. So they need to raise tariff to in order to be able to clear AGR dues. Some analysts believe Vodafone Idea may not be able to pay the AGR dues and may go out of business. If such a situation arises, analysts expect big price hikes from Bharti Airtel and Reliance Jio Infocomm in a private duopoly structure, the Economic Times said in a report citing analysts.
“With Arpus still well below the Rs 180-200 pre-Jio levels and a reduction in overall telecom-related consumer spending (as a percentage of GDP) over the past three years, there’s adequate scope for telcos to raise tariffs by another 30% later this year,” Sanjiv Bhasin, director at IIFL Securities, told business daily.
Analysts expect private telcos to leverage the fall in consumer-level telecom spends to 0.73% of GDP in the September quarter of FY20 from 1.25% just over three years ago, saying the scenario offers adequate headroom to push through a second round of price hikes.
Just over a month ago, Bharti Airtel, Vodafone Idea and Reliance Jio had increased bundled prepaid tariffs by 14-33% for the first time in three years. That is estimated to boost monthly APRU from the present Rs 120 level to around Rs 160, over a few quarters. But with Vodafone Idea’s survival now in the balance if it fails to also secure any meaningful relief from the government, analysts expect the tariff hikes to happen quicker, the business daily mentioned.
“Even after the recent tariff hike (in December 2019), consumers are still paying a paltry 0.86% of per capita income for their communication needs, which is much lower than what it was four years ago,” the business daily quoted Rajan Mathews, director general of Cellular Operators Association of India (COAI).
Analysts said consumer spends on communications in India are well below Singapore, Malaysia, China/Hong Kong, the Philippines, Japan, Australia, the US, the UK, Germany and France.
Given that mobile internet consumption has soared over the past three years since Jio’s entry, mobile users, Bhasin said, also “won’t mind paying a little extra as data is now the new gold”.
Kotak Institutional Equities said that aggregate annualised consumer-level telecom spends for the September 2019 quarter at Rs 1.45 lakh crore was 21% below June 2016 levels of Rs 1.84 lakh crore. It added that during the same period, the telecom industry’s “voice traffic was up 2.1x times and data traffic 43x since Jio’s entry”.
Experts say the actual timing of the next round of price hikes will hinge on Vodafone Idea’s survival. The struggling telco has said it is exploring further options, including filing of a curative petition in the top court.
Vodafone Idea faces AGR dues of Rs 53,039 crore in the aftermath of the Supreme Court’s October 24 order, and its subsequent rejection of the telco’s review petition. It needs to pay the government by January 23…Read more>>
Source:-techiyogiz
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