India’s leading telecom operators Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) have announced tariff hikes within hours of each other. Currently, these companies are trying to achieve economic development of this sector through 5G (Five G) services.
Jio has hiked charges by 12-25 percent, and is also seeing a huge hike in its premium plans. Their most popular and active plan is 28 days validity and 1.5 GB data per day. There is a huge fee increase of 25 percent in this plan. Vodafone has hiked Vi charges by 10-20 percent. Jio and Airtel’s new service rates will be effective from July 3, while Vi’s new rates will be effective from July 4.
What exactly is the reason behind the price hike?
Airtel said in a statement that in order to create a financially sound model for telecom companies in India, the average revenue per user (ARPU) of each mobile user should be above Rs 300. That is why we welcome the announcement of new charges. As of March 2023, Airtel’s per capita revenue rate (quarterly) was 209, Jio’s (quarterly) 181.70 and Vodafone’s (quarterly) 146.
In 2016, Jio announced the launch of 4G services. They then offered the service for free for the first one year and then at much cheaper rates than their competitors. This led to disruption in India’s telecom sector. India got the cheapest data rate in the world and as a result there was an additional increase in the number of people accessing online services. But, there has been a demand for a gradual price hike for some time now.
Analysts at Bernstein noted that telecom companies were expected to raise prices after the general elections. In fact for Airtel, their ARPU is expected to stabilize at Rs 280 by FY 2026 and Rs 300 by FY 2027.
Increase in rates of 5G services
These companies have spent heavily on 5G services. All these companies tend to get a return on that huge investment. The question was when these companies will take a step in that direction. For the initial period, all these companies maintained the formula of uniform service, uniform price. But these companies feel that now is the time for return of investment, which is also one of the main reasons behind this price hike.
JP Morgan gave an analytical comment on this and said that the price hike was led by the GO sector and not by Airtel or Vodafone. Currently, Jio has shifted its focus to return on investment. Jio has raised the threshold for unlimited 5G data from 1.5 GB/day plan to 2 GB/day premium plan for 5G access. This has resulted in a significant increase of 46 percent in tariff for 5G users.
Telecom companies gave a muted response to the recently concluded spectrum auction, which netted only Rs 11,340 crore in the government’s coffers, barely 12 percent of the government’s reserve price of Rs 96,238 crore. But, in 2022, the same companies spent over Rs 1.5 lakh crore to acquire 5G spectrum. Therefore, this price increase should be said naturally.
