Connect with us

Headlines of the Day

A round of tariff hikes anticipated soon

Telecom sector analysts expect another round of tariff hikes following the Rs 1.5-trillion auction of 5G spectrum, which concluded on Monday.

“Given the sizeable investments towards spectrum acquisition, we believe telecom companies will charge differential pricing for 5G services. Indeed, adoption of 5G services will hinge on the extent of premium over 4G tariffs. In a bid to ensure mass adoption of 5G, telecom companies may raise tariffs for 4G services, too, despite two rounds of major tariff hikes effected in December 2019 and November 2021, respectively. We expect another tariff hike for 4G services in the second half of the current fiscal,” said Manish Gupta, senior director of CRISIL Ratings.

Telecom companies acquired 51,236 MHz of spectrum worth over Rs 1.5 trillion across various bands. Reliance Jio came out on top in the auctions, purchasing spectrum worth Rs 88,078 crore. Bharti Airtel and Vodafone Idea purchased spectrum worth Rs 43,084 and Rs 18,799, respectively.

Nomura Global Markets Research estimates that telecom service providers would require a modest 4 per cent incremental tariff hike on their overall subscriber base or a 30 per cent premium over 1.5 GB/day 4G plans, following the spectrum acquisition.

The government has removed spectrum usage charges (SUC) for all spectrum purchased after September 2021 and Nomura estimates that with the large SUC savings, the net annual outlay for companies would be around Rs 7,500 crore.

“Historically, Indian telecom companies have refrained from charging a premium for 4G plans (vs 2G/3G data plans). With potentially higher speed on offer and likely initial uptake from premium customers (smartphones above Rs 15,000), there is a potential for telecom companies to charge a premium for 5G (vs 4G), in our view. 5G tariff plans would be a key monitorable in the near term, and 5G premium (vs 4G) may provide the next leg of ARPU (average revenue per unit) uptick for the telecom companies,” Nomura said in its report.

According to Goldman Sachs Equity Research, 5G rollouts have not resulted in any meaningful uptick in capex for telecom companies globally, and it foresees a similar trend in India. Business Standard

Click to comment

You must be logged in to post a comment Login

Leave a Reply

 

Copyright © 2022 Communications Today

error: Content is protected !!