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What impact to expect from the recently announced tariff hikes

Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea (Vi) — India’s three key telecom operators— recently announced an increase in their mobile tariff plans with an eye on greater revenue realisation and monetisation of their 5G investments. The hikes, which ranged between 11 per cent and 25 per cent, and are the first across companies since December 2021, came into effect in the first week of July. The average revenue per user, according to analysts, is expected to continue rising over the next year (chart 1).

Subscriber churn is expected, though companies have varied the hikes to minimise the impact at the lower end. Reliance Jio Infocomm is expected to widen its lead over others in terms of total subscribers (chart 2). Previous tariff increases resulted in a lot of subscribers dropping out as mobile bills climbed.

Some of this could be due to consolidation with people surrendering multiple connections. Overall teledensity, or the number of connections per hundred inhabitants, has fallen between 2019 and 2024 (chart 3).

Capital expenditure by telecom companies is expected to continue absorbing a large amount of money—over ~3 trillion between the financial year 2024-25 (FY 25) and FY 26, according to some estimates. The telecom companies had spent over ~11,000 crore in auctions in late June. The indebtedness of these companies as measured by the net debt/equity ratio is expected to come down despite these costs, thanks to higher charges (charts 4,5).

India’s telecommunications prices remain lower than many of its peers. Customers in countries like Japan and the United States pay five times as much as those in India, even after adjusting for differences in the cost of living. Customersin emerging market peers like Brazil, Russia and others pay between 10 per cent and 60 per cent more (chart 6).

Business Standard

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