Increase in upcoming telecom tariffs may be lower than 2021

Telecom operators have entered the mega capital expenditure cycle with the launch of 5G services. So, the discussion regarding the next leg of tariff hikes for 4G plans are making the rounds again. However, according to Financial Express,analysts have stated that the hike in tariffs will be lower than that in 2021, largely because of inflationary pressures. According to Nitin Soni, senior director at Fitch Ratings, the next leg of tariff hikes is expected in the next 6-12 months. He added that a delay in tariff hikes by the telecom companies is expected largely because of weak consumer sentiment on inflationary pressures.

After 2 years, the telecom firms in November previous year increased tariffs across some prepaid plans by 20-25 percent. While analysts gave mixed views on the timing of tariff hikes this time, they are expecting them to be in the range of 10-20 percent. Tariff hikes are crucial for telecom companies to raise their average revenue per user (Arpu), which is a key parameter of profitability for them.

The rating agency has a stable outlook on the Indian telecom sector and it is expecting growth in revenues and profits on higher Arpu, potential from the 5G enterprise business, and low spectrum usage charges.

Currently, India has one of the lowest mobile tariffs globally. This development owes to the fact that Reliance Jio had disrupted the telecom market with its entry in 2016 by providing free data and unlimited calling.

Lately, companies like Bharti Airtel and Vodafone Idea have been pressing for tariff hikes for improving their revenues and coping with the rising operating costs. Bharti Airtel has time and again stated that it would not shy away in taking the lead in increasing tariffs. In the earlier hikes, it has been noted that Bharti Airtel first raises the tariffs, and as a market reaction, peers Reliance Jio and Vodafone Idea follow.

The telecom operators had raised the tariffs for postpaid plans in July last year. On the 5G tariff plans, the companies would continue to provide the services on the current 4G plans for some time now according to the analysts.

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