No More Telecom Tariff Cuts

The Indian telecom industry has been suffering with merely one or two operators showing growth in their subscriber base and revenues, as shown by the recent TRAI data. However, this could be about to change in FY20 as the telco’s revenue may rebound at 7%, a CRISIL report said. Attributing this rebound to hike in average revenue per user (ARPU) by 11%, the report said that the initial price aggression among companies is no longer beneficial. It further said that the subscriber base is going to fall by 4%.

The fall in ARPU was a result of tariff war which was perpetuated by Mukesh Ambani’s entry in the telecom industry with Reliance Jio. “In the past two years, the industry has lost about 20% of potential revenue, tantamount to over Rs 40,000 crore,” The CRISIL report said.

Stating that the pricing aggression will hurt major telcos equally, CRISIL said that telecom tariffs have bottomed out, as reflected in stable pricing and the fact that the top three telecom companies (telcos) now have almost equal revenue market share.

“Pricing aggression is expected to remain moderate and selective in fiscal 2020, given the new entrant has revenue market share leadership in more than 50% of the 22 circles,” said Hetal Gandhi, Director, CRISIL Research.

The telecom industry has been worse off in the last two quarters namely July-Sep and Oct-Dec 18. With only Mukesh Ambani’s Reliance Jio and PSU BSNL actually managing to expand it subscriber base, the rest of the companies, including big names such as Vodafone Idea, Bharti Airtel and Tata Telecom, lost their subscribers, TRAI had said in its quarterly Indian Telecom Services Performance Indicator Report which was released a few days back.

While Reliance Jio added 27.87 million subscribers, BSNL also managed to mop up 1.12 million telephone users, becoming the only profit garnering companies in Dec quarter end. “All other access service providers showed negative growth in their telephone subscriber base during the quarter,” TRAI had said, adding that Bharti lost 10 lakh subscribers in the July-Sept quarter and Vodafone and Idea collectively lost over 80 lakh users in the same period, before their merger.―Financial Express

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