The average revenue per user in the Telecom industry is all set to increase, thanks to a range of tariff hikes by leading telecom operators and the rise in data usage after COVID-19. In the next four years, the total revenue amassed by the telecom industry as a whole is projected to reach Rs 2,60,000 crores.
The expected growth figures are variable as Reliance Jio and Bharti Airtel are yet to take a call on tariff hikes and it might take a few more months to declare higher tariff rates. Given that Reliance Jio and Bharti Airtel are leading the telecom market in revenue and usage, the two operators can afford a delay in their tariff hike decisions. There has been no sign of tariff hike from either side though.
On the other hand, Vodafone Idea, the lesser placed stakeholder of the Indian Telecom market cannot afford a delay on the tariff hikes as it can affect the company’s revenue generation badly.
The telecom operators of India were previously waiting for the Telecom Regulatory Authority of India to take the call on tariff hikes by fixing floor prices. Since TRAI just had a leadership change, it is highly unlikely that there will be a tariff hike in near future. However, Vodafone Idea has to take a decision on tariff hikes soon as analysts cannot see Vodafone India surviving without a price hike.
Vodafone Idea is struggling under the weight of a moratorium and loan deferral. It is only afloat on a small cash inflow from Indus stake sale and fibre monetisation. Vodafone Idea needs to double its average revenue per user in the next five years to survive in the market.
The telecom operators had delayed the price rises due to the COVID-19 pandemic and lockdown which put economic pressure on the consumers and created a market environment where hikes were not feasible. But in the current scenario, demands of a price hike by 20% are on Vodafone Idea as it needs to up its revenue by March.
The difficulty in front of Vodafone Idea is that if the operator decides to be the first one to increase prices, the move could badly hurt Vodafone Idea. Higher pricing might drive consumers away from the brand and create an acquisition advantage for its competitors.
But an equal rate of price hike from Vodafone, Airtel, and Jio is unlikely as the latter two are comfortably placed ahead. A price hike from Reliance and Airtel will only cause disappointment in their customers and help Vodafone with revenue enhancement. Given that a price hike from both Reliance Jio and Bharti Airtel will only hand over a competitive advantage to Vodafone Idea, one might not see a tariff hike from Airtel and Jio anytime soon.
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