Telecom crisis deepens: Airtel, Vodafone Idea mobile service rate hikes from December to hit customers hard

The ongoing telecom crisis is set to hit the customers hard with two of the country’s largest telcos—Bharti Airtel and Vodafone—deciding to hike tariffs from 1 December after they posted historic losses on account of provisioning for the AGR pending dues, according to an IANS report. Bharti Airtel on Monday said it will start raising rates for services in December to make business viable. “The telecom sector is highly capital intensive with fast-changing technology cycles that require continuing investments. It is, therefore, extremely important that the industry remains viable to support the vision of Digital India. Accordingly, Airtel will appropriately increase price offerings in the month beginning December.

Bharti Airtel: Sector is highly capital intensive with fast changing tech cycles that require continuing investments. It is, therefore, extremely important that ind remains viable to support vision of Digital India. Accordingly, co will hike prices in from December

— CNBC-TV18 (@CNBCTV18Live) November 18, 2019

The company also said that it understands that telecom regulator Trai is likely to initiate a consultation for bringing rationality in pricing in the Indian mobile sector, which has been operating at prices that have been eroding its viability. Earlier on Monday, Vodafone Idea said it will raise mobile services rates from 1 December in the wake of ongoing financial stress, according to a PTI report.

Nov 18: Vodafone Idea says, "the acute financial stress in the telecom sector has been acknowledged by all stakeholders & a high level Committee of Secretaries is looking into providing appropriate relief."

— CNBC-TV18 (@CNBCTV18Live) November 18, 2019

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“To ensure that its customers continue to enjoy world-class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective 1 December, 2019,” Vodafone Idea said in a statement. Both Airtel and Vodafone Idea did not disclose the quantum of hike in tariff it is planning from 1 December. [caption id=“attachment_7053111” align=“alignleft” width=“380”]  Representative image. Reuters[/caption] Vodafone had also noted that the acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high-level committee of secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief. Vodafone Idea Ltd had said that it would “suitably increase the prices of its tariffs” effective from 1 December. “Mobile data charges in India are by far the cheapest in the world even as the demand for mobile data services continues to grow rapidly…The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high-level Committee of Secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief,” according to a Vodafone Idea statement. “To ensure that its customers continue to enjoy world-class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective 1 December 2019… VIL will continue to actively invest in making its network future-fit by embedding new-age technologies and launching new products/services to cater to the evolving needs of its over 300 million customers,” it added. Airtel and Vodafone Idea had posted a combined loss of Rs 74,000 crore in Q2 by provisioning for the AGR pending dues. Vodafone has hinted at not being able to remain as a going concern if relief does not come for the sector. The Supreme Court late last month upheld a DoT demand that telcos clear their adjusted gross revenue (AGR) dues, a share of which has to be paid as licence and spectrum fee to exchequer. Following the order, both Bharti Airtel and Vodafone Idea last posted massive net losses while provisioning the payments of these dues. According to the Telecom Regulatory Authority of India, prices of mobile data have fallen drastically by about 95 percent to Rs 11.78 per gigabyte (GB). Mobile calling rates dipped by about 60 percent to about 19 paise per minute between June 2016-December 2017. Promoter firm Vodafone, which holds a majority stake of 45.39 percent in Vodafone Idea, has said that the group will not infuse any further equity investment in the Indian telecom venture and reportedly similar stand has been taken by the Aditya Birla Group. This leaves the company with no other option but to support operations from internal resources. Vodafone Idea said it has the largest spectrum footprint and by accelerating its network integration, the company is rapidly expanding both its coverage and capacity and is well on track to offer 4G services to 1 billion Indian citizens by March 2020. “VIL will continue to actively invest in making its network future-fit by embedding new-age technologies and launching new products/services to cater to the evolving needs of its over 300 million customers,” the statement said. Dismissing rumours of its exit from the Indian market, Vodafone Idea CEO Ravinder Takkar last week had said the government is clear that there would be no duopoly and it is in the process of filing a review petition. --With inputs from agencies