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Next 5 years-Telcos can increase tariffs by 1.5x, ICICI Securities

India telecom services’ tariffs for popular plans have risen double-fold since July 2017, yet the increased data subscriber adoption and growth in data consumption establishe the inelastic nature and higher ‘consumer surplus’, a report said on Friday, adding that telecom services providers (TSPs) can increase tariff by at least 1.5 times over the next five years.

The country has among the lowest telecom tariff as per percentage of gross national income per capita (GNIpc) and most affordable tariff as per International Telecommunication Union (ITU) database, a report by ICICI Securities said, adding that India telecom tariff as percentage of GNIpc is at 1.11 per cent compared with 1.6 per cent for economies whose GNIpc is under $5,000.

India’s tariff is just $2 compared to a global average of $4. “In terms of absolute tariff, India’s is the lowest at $2 per month while Brazil stands at $6.1. Other comparable economies such as Bangladesh stand at $2.9, and Indonesia at $5.8. Thailand’s and Philippines’ tariffs are significantly higher compared to median at 2.92 per cent and 2.32 per cent of GNIpc, and absolute tariff plan stands at $15.8 and $6.6, respectively,” it said.

Consumer surplus
Developed economies such as the US has telecom tariff at 0.74 per cent of GNIpc, and absolute telecom services tariff plan at $43.6, it said in the report. “Despite the rise in tariffs, India’s telecom services are most affordable globally, and Indian consumers enjoy the highest ‘consumer surplus’. Since Reliance Jio’s first paid recharge plan at ₹303 for 84 days (base plans with 1GB/ 1.5GB data per day for 84 days) in July 2017, it has increased to ₹666. Airtel has recently increased its minimum recharge plan to ₹159 (from ₹99),” it said.

The above analysis suggests India’s consumers still enjoy maximum ‘consumer surplus’ relative to comparable economies despite large tariff increases in the past few years, it said. “This gives us comfort that Indian TSPs can increase tariff by at least 1.5x over the next five years and yet maintain the status of being the most affordable. Yet, India will retain being the most affordable telecom services tariff market. Indian telecom tariffs (on a comparable basis) for unlimited data plans should be even more attractive, in our view,” it added. The Hindu BusinessLine

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