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Telecom Companies Can Survive Only By Increasing Tariff

Following the AGR ruling of the apex court and the ARPU compulsion, every telecom firm fears increasing tariffs will push customers to rivals

India’s telecom is the cheapest service in the world, but if this business is to be kept alive then companies will need to change the situation to not only have healthy balance sheets with strong free cash flow but also able to invest in better technologies. Bharti Airtel and Vodafone-Idea, which were once giants in the domestic telecom industry, are suffering losses these days and the rest of the Indian telecom companies are in a bad condition too. They will remain the so for a long time. Bharti Airtel and Vodafone-Idea have not seen achchhe din since Mukesh Ambani-owned Reliance Jio entered the telecom sector. This year, none can say that they do not have AGR arrears. While the wrath of the Supreme Court could not have befallen them at a more inopportune moment, if these companies want to survive, they must collect more tariffs from the customers in what has to be a collective decision.

Motilal Oswal said in a recent report that every player needed an ARPU hike, VIL needed to survive and that RJio needed to justify its high valuations in recent investments while Bharti needed some leverage. Otherwise, these rivals would need to come together again, as they had done in December 2019. The near-term economic conditions of the last 10 years and history so far do not present a beautiful picture of the telecom industry. But any tariff hike is possible only if there is a collective effort on the part of all the companies. For, if only one of the charges is increased, millions of its customers will flee to the other two companies.

Coronavirus must have opened some new dimensions for many operators Because, at the time of lockdown, many such facilities were needed by the citizens, which only the telecom sector could provide. But the charges have not increased due to this. Rather, in this sector, the cost for the customer has moved in the opposite direction, making him enjoy less recharge, consolidation of dual SIM cards and fewer 4G off-takes due to the lack of counters or financial constraints.

There are other factors such as the apprehension among the players of the economy, such as a shrinking GDP and a decrease in people’s expendable income, causing the consumer to try to reduce their spending. At the same time, telecom operators are badly hit by an increase in average revenue per user (ARPU). Ironically, the companies do not want to raise at least one-fourth of the amount they should due to the aggravating conditions in the economy and the COVID situation. Vodafone-Idea needs to increase tariffs by 50% in order to survive, Reliance Jio may need to increase its ARPU by 40% and according to Bharti Airtel’s management comment, the firm will have to pay Rs 200 in the near term. And the need to get ARPU of around Rs and Rs 300 in the long term.

Finally, telecom companies must redesign their price plans so that they are capable of providing consumption-driven ARPU slabs. This will change people’s data needs and distinct requirements of different subscribers.

Sourav Mishra

By Sourav Mishra

Country Head at Panda Security, past life regression therapist

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