RJio will gain most from India's tariff hike

It is a headline that hardly ever appears in the country, but three major Indian telcos -- Bharti Airtel, Vodafone Idea and Reliance Jio -- have now been able to increase their prices.

This tariff hike should help the industry to lift revenues and cut debts. It might also help in reducing the competitive intensity. At the same time, it could hit the consumption of data, which has been fueled mostly by rock-bottom rates.

The Indian telecom industry has been facing challenges on multiple fronts, including the hypercompetitive environment and rising debt. The recent Adjusted Gross Revenue (AGR) judgment, which demands a $13.9 billion additional payment from operators, was the trigger that finally led to the price hike by all the service providers. (See Indian telcos find some relief.)

On average, operators have increased rates for prepaid subscribers by 40% in the first price rise since 2016. However, the increase is likely to benefit RJio more than it does other players, even though RJio's tariff is still at least 40% less than either Airtel's or Vodafone Idea's. The reason is that RJio serves a bigger proportion of prepaid subscribers. Higher prices should help to boost the average revenue per prepaid customer, which fell to 120 Indian rupees in the last quarter.

Moreover, since RJio's tariff remains the cheapest, it could help to lure customers from Airtel and Vodafone Idea.

"These plans will provide up to 300% more benefits to the RJio consumers (compared with previous plans), upholding the RJio promise of providing the best-quality service at the lowest price globally,” says the statement issued by RJio earlier this week. The additional benefits here refer to more calling time and the ability to call rival networks without incurring extra charges. Earlier this year, interconnect fees prompted RJio to begin charging subscribers for voice calls to customers using other networks.

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It is significant that RJio decided to increase its prices along with others, suggesting the days of intense price-based competition could be in the past. It might also signal that RJio is no longer keen to offer services at rock-bottom rates.

The service providers are likely to announce an increase in their postpaid charges, as well.

Seen as a positive development for the industry, the changes are just a first step in the revival of the sector. And competition could always lead operators to roll back the increases in future.

— Gagandeep Kaur, contributing editor, special to Light Reading

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