Telecom Tariff Hikes To Benefit Government, Operators, Says COAI’s Rajan Mathews

All three telecom companies, Vodafone Idea, Bharti Airlte and Reliance Jio have raised prices of their prepaid voice and data services. The telcos on Sunday announced hikes in prices of their popular prepaid plans by 25-30 percent and tariffs of low and high end prepaid plans by 40 percent. The tariff hike is higher than what the street was estimating.

However,  the companies have not yet hiked tariffs of their postpaid plans.

Rajan Mathews director general at Cellular Operators Association of India (COAI) and Rajiv Sharma, head of research at SBICAP Securities spoke about the changed afoot in the telecom sector in the country in an interview with CNBC-TV18.

Talking about the impact of this tariff hikes, Sharma said that 80 percent of revenue pool has seen a 40 percent increase in tariffs broadly.

“On the postpaid side, we do expect, something will get announced and there could be 10-15 percent tariff hike in that bucket as well.

“So, at least Rs 12,000-13,000 crore of incremental Ebitda (earnings before interest, taxes, depreciation, and amortization) is seen in case of Bharti and even more in case of Jio. However, when it comes to Vodafone, it depends because everybody has been forecasting decline in subscriber base; if that decline continues then the proportionate increase in Ebitda could be lower. The key interesting trend is that the voice pricing is back,” said Sharma, adding that one could see dual-sim behaviour coming back since off-net pricing was getting charged by the telcos,” he added.

According to Mathews, operators will be watching how customers and market responds to tariff increases. Tariff hikes have been necessitated by the adjusted gross revenue (AGR) ruling of the Supreme Court, he said.

On the impact of price hike, Mathews said, “There are multiple beneficiaries—30 percent of talk time revenue still goes to the government; so in the face of 30-40 percent price increases, 30 percent of that will go back to the benefit government. So if the government benefits, obviously the operators will benefit. We are hoping that the customers will also benefit because much of these investments and increases will go back in improving the quality of the customers’ experience which we have seen declining because of volume increase.”

Giving some data points, Mathew added: “A couple of years ago voice minutes per user per month was about 360 minutes—that has gone up to over 880 minutes per subscriber per month. If you look at data, it went from half a gigabyte per user per month to over 11 gigabytes—that has put tremendous amounts of pressure on out networks to expand it and to build it for capacity. Therefore, a lot of this will go back into the fundamental nature of our business which is customer experience. So it should also be a good experience for the customer. So all-around it’s a beneficial move,” he added.―CNBC TV18

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