Govt call on tariff hike fails to unite telcos

Telecom operators have got fresh feelers from the government that they must review their low tariffs. But telcos are hesitant to take a unified call on raising tariffs as such measures had failed to work in the past, according to industry sources.

This comes in the backdrop of an industry call urging the regulator Trai to set a floor price for telecom operators. The telecom regulator, however, is unlikely to set a minimum tariff as it may be considered an anti-competitive move, officials pointed out. “An increase in tariff, agreed by the industry earlier, also did not work when some players started giving discounted offers for certain segments, to ensure that their customer base was not impacted. Such new tariffs were not even disclosed to the regulator. So, there’s no guarantee that it will work again,” says a senior executive of a telecom company.

In 2018 also, the Centre had suggested to telcos to review tariffs as low rates were destructive for the industry and were affecting the government’s revenue collections.

Telecom firms are in a revenue-sharing arrangement with the government. Months after the government nudging, telcos arrived at a consensus to raise tariff by around 20 per cent in December 2019.

That was not enough to get financially-stressed companies like Vodafone Idea out of the woods, analysts pointed out.

While telcos have maintained that the current tariffs were disruptive and not feasible in the long run, no firm has taken the first big step to raise rates. In the last few weeks, however, Bharti Airtel and Vodafone Idea have increased tariffs in certain limited segments. For example, Airtel hiked tariffs by 50 per cent for enterprise customers in the post-paid category—a small fraction of the telco’s total subscriber base.

Also, compared to Airtel and Vodafone Idea, rival Reliance Jio has only a negligible share of the post-paid market.

In addition to the change in post-paid tariff, Airtel also pushed up the price of its minimum pre-paid tariff package from Rs 49 to Rs 79. So, about 30 million customers have to pay a little extra. Analysts have also reiterated that while the tariff increase is a good sign, it may not make any substantial material difference to the bottom line of Vodafone Idea, which is struggling to remain afloat. To achieve a major improvement, an across-theboard increase in tariffs, which happened over 19 months ago, must be repeated.

Airtel chairman Sunil Mittal said recently that average revenue per user (ARPU) in a month should hit around Rs 200 for the industry to be comfortable. A senior company executive however argued that the company would not make the first big move as its tariffs were higher than that of Reliance Jio. Such a move could reduce its market share, he said. Sources close to Jio also said they would refrain from taking the first step.

The issue on telcos offering segmented tariff offerings has been a bone of contention for a while. In 2018, Trai had sent notices to Bharti Airtel and Vodafone Idea, pulling them up for failing to comply with the tariff reporting norms (where a new tariff plan has to be communicated to the regulator). It had threatened to impose a fine too. Subsequently, Airtel appealed and was able to get an interim relief from the telecom tribunal TDSAT.

In November 2020, the Supreme Court, where the regulator went in appeal, made it clear that Trai can ask for details on segmented tariffs for record. But it would be Trai’s duty to keep the information confidential, the top court had said.