Vodafone Idea, Bharti Airtel to hike mobile tariffs in India

Mumbai, India – Shares of Vodafone Idea Ltd and rival Bharti Airtel Ltd rallied after the wireless carriers said they planned to raise tariffs starting next month, the first increase since the entry of billionaire Mukesh Ambani into India’s telecommunications market in 2016 triggered a price war.

Vodafone Idea surged as much as 30 per cent in Mumbai on Tuesday, while Bharti Airtel rallied as much as 6.6 per cent. Reliance Industries Ltd’s shares rose more than 3 per cent to a record on optimism Reliance Jio Infocomm Ltd will also benefit from higher tariffs.

‘Mobile data charges in India are by far the cheapest in the world even as the demand for mobile data services continues to grow rapidly,’ Vodafone Idea, formed by the merger of Vodafone Group Plc’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd, said in a statement late on Monday. Higher rates will become effective December 1, it said.

Separately, a Vodafone Idea spokesman declined to disclose details about the possible tariff increase and plan details. The move comes after the wireless carrier reported the worst quarterly loss in Indian corporate history last week. The announcement of the increase was followed by Bharti Airtel, which also said it will raise phone rates from next month.

Vodafone Idea last week took a one-time charge related to a US$4bn demand from the government, leading to a net loss of US$7.1bn in the September quarter. Saddled with about US$14bn of net debt, Vodafone Idea is fighting for survival after India’s top court last month ordered it and others including Bharti Airtel to pay fees that the government said were due from prior years.

Indian telecom firms have been faced with high debt and low prices especially after the entry of Jio. That drove some to bankruptcy and led to the merger of others such as Vodafone with Idea. The acute stress in the sector has been acknowledged by all stakeholders and a high-level government panel is looking into providing appropriate relief, Vodafone Idea said on Monday.

‘The key will be Jio’s response to the price hike. We think Jio could likely follow,’ Jefferies analysts wrote in a note. Reliance has potential to gain from already above average valuation, thanks to the possibility of higher telecom tariffs and its debt reduction plans, Morgan Stanley analysts wrote.