Indian telcos explore price rises
A little-noticed decision by India's Bharti Airtel to increase prices in Haryana and Odisha could be a harbinger of looming rate rises across the sector.
The minimum recharge in these two circles is now up from 99 Indian rupees (US$1.2) to INR155 ($1.89), a hefty increase of 57%. Previously, the $1.2 tariff pack had been the cheapest entry-level plan offered by Airtel, India's second-biggest operator.
The choice of service areas (or circles) for the tariff hike, possibly to test waters, is interesting. Odisha is one of India's poorest states and so any hike here in will probably trigger a loss of customers.
It is a calculated risk by Airtel and is in keeping with its strategy to focus on higher-spending subscribers. On the other hand, the success of price rises in the prepaid segment would have a massive impact on telco revenues, since more than 90% of Indian customers are on prepaid deals.
The hike, then, could lead to a similar increase in tariffs in other circles and possibly also in the postpaid segment.
A tariff hike was anticipated this year with the launch of 5G services. Service providers were expected to boost tariffs as they shifted customers to the latest generation of mobile technology. As of now, operators are providing 5G at 4G rates, but largely because of limited coverage.
The cost of rolling out 5G networks is one reason for price rises now. Telcos spent INR178.75 billion ($2.18 billion) to acquire 5G spectrum earlier this year and will be investing significantly to build 5G networks.
Those 5G deployment costs, moreover, could be even higher in India than elsewhere. According to a recent study by Analysys Mason (commissioned by Ericsson), the cost of a 5G rollout in India will be around $75 billion, higher than in any of the other 14 countries studied – those being Bangladesh, Brazil, Chile, Columbia, Egypt, Indonesia, Malaysia, Mexico, Morocco, Nigeria, Pakistan, South Africa, Thailand and Turkey.
One of the reasons for this costliness is that Chinese vendors Huawei and ZTE are not available to Indian operators for a 5G rollout. Both are known for their price competitiveness and their absence means Indian telcos may have to spend more on deploying 5G networks.
Of all India's operators, Vodafone Idea would probably welcome a successful round of price rises the most. Unlike Reliance Jio and Airtel, it has yet to launch 5G, and it has also racked up enormous debts. Higher prices could help to pay those off and fund 5G rollout.
All three private-sector telcos – Airtel, Jio and Vodafone Idea – have been vocal about increasing average revenue per user to at least INR200 ($2.40) a month. The last time Indian telcos upped prices was in November 2021, after a gap of about two years.
Another reason for exploring tariff rises in the prepaid segment might be to move 2G subscribers to 4G networks. Airtel's increased tariff in two circles now includes a gigabyte of data for 24 days in comparison with the 200 megabytes for 28 days that came with the $1.2 tariff. Price rises may push 2G subscribers to explore 4G.
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— Gagandeep Kaur, contributing editor, special to Light Reading