Tariff Hike Impact on Telecom Companies3 min read
In this article, we will do a comparative analysis of tariff hike impact on Telecom players - Airtel vs Vodafone Idea vs Reliance Jio. How will it help Telecom sector?
Comparative Analysis of Tariff Hike Impact on Telecom Players – Airtel vs Vodafone Idea vs Reliance Jio
In this article, we will do a comparative analysis of tariff hike impact on Telecom players – Airtel vs Vodafone Idea vs Reliance Jio. Telecom Sector is going through a rough phase and has a huge debt. How will these tariff hikes help Indian telecom sector to revive?
Tariff Hike Impact on Telecom Companies – Airtel vs Vodafone vs Reliance Jio
Why Tariff Hike?
- Vodafone Idea and Airtel have shown huge losses in September quarter. These Telecom players are also facing a January-end deadline to pay up Rs.53,000 Cr and Rs.35,000 Cr in AGR dues as per Supreme Court.
- Reliance Jio is having a huge debt burden. So Reliance Jio is also taking the necessary steps to move towards its target to become a debt-free company.
- According to the reports by Jio, there is a need for the steps “to help sustain” the telecom industry, which is burdened with over Rs.7 Lakh Cr of debt and the world’s lowest average revenue per user (ARPU)
- In short, all the telecom companies decided to raise the prices of their plans. How will these tariff hikes help Indian telecom sector to revive?
- Let’s see the tariff hike impact on each Telecom player and do a comparative analysis of the same.
Tariff Hike Impact on Telecom Companies – How Will it Help them?
- Here, we have done a comparative analysis of effects of tariff hike on Telecom players. How the tariff hike will help to boost the Revenue of the telecom companies, Earnings before Interest Taxes Depreciation and Amortization (EBITDA) is explained in the above table.
- The Rise in EBITDA of Telecom players will be :
- Airtel = Rs.7,400 Cr
- Vodafone Idea = Rs.13,500 Cr
- Reliance Jio = Rs.8,500 Cr
- Vodafone Idea and Airtel had been making losses and had been saying that rates were unsustainable. The higher-than-expected tariff increases would lead to significant revenue gains.
- Tariff rise would also help attract investments in Airtel and Vodafone Idea, which are looking to raise funds to pay over Rs.35,000 Cr and over Rs.53,000 Cr, respectively, in adjusted gross revenue (AGR)-based dues by January, as per a Supreme Court ruling.
- Thus, these rise in EBITDA will help Vodafone Idea and Airtel to raise funds going forward required to pay AGR dues.
Tariff Hike Impact on Consumers
- Minimum recharge became more expensive, now at Rs.49 against Rs.35 earlier (for unlimited call + 100 MB data)
- This 30-45% tariff hike would be the biggest in India’s telecom industry, with pricing of voice services back for most plans. A prolonged price war since 2016, after the entry of Reliance Jio in Telecom Sector, damaged industry finances and heavily hurt revenues.
- Vodafone Idea and Airtel, both increased rates only for prepaid subscribers, who account for over 90% of their user base.
- Airtel tariff increases range from 50 paise a day to Rs.2.85 per day. Airtel is going to continue to make large investments in emerging technologies and digital platforms.
- While, Reliance Jio is going to provide up to 300% more benefits than its competitors with the additional tariff on its users. Mr.Mukesh Ambani said, “While remaining committed to the ultimate interest of the consumer, Jio will take all necessary steps to help sustain the Indian telecommunications industry. Also, Jio will continue to work with the government on consultation for revision of telecom tariffs.”
- As per the Fair Usage Policy (FUP), additional 6 paise per minute charge after a limit, for calls made to rival’s networks.
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