Jio, Airtel, Vi may increase tariffs ahead of 5G rollout in India

The 5G spectrum auction concluded in India with Jio purchasing 24,740MHz spectrum for Rs 88,078 crore, Airtel acquiring 19867.8MHz of the spectrum for Rs 43,084 crore and Vodafone Idea (Vi) acquiring 3300MHz in the mid-band 5G spectrum and 26GHz in the mmWave 5G spectrum. The three telecom companies are expected to start rolling out 5G connectivity in India sometime in October this year. Jio chairman Akash Ambani has also hinted towards rolling out 5G connectivity across the country around August 15. “We will celebrate ‘Azadi ka Amrit Mahotsav’ with a pan India 5G rollout. Jio is committed to offering world-class, affordable 5G and 5G-enabled services,” Ambani had said when the 5G auction concluded. As the telecom companies gear to roll out 5G services in India, experts believe that the telecos could increase tariffs in India to offset their recent spending.

The Department of Telecom (DoT) isn’t charging Spectrum Usage Charge (SUC) from the telecom companies. The department has also abolished three percent floor rate. Owing to these changes, researchers at Nomura Research believe that three telecom companies are expected to hike tariffs by a modest four percent. “We note that with large SUC savings, the net annual outlay for spectrum would be ~INR75bn for the telcos and would require a modest ~4% incremental tariff hikes (on overall subs), or ~30% premium for 5G (vs the popular 84 day, 1.5GB/d 4G plan), on our estimates,” Nomura Research wrote in its report.

The research organisation also said that Jio users are expected to face a higher tariff hike compared to Airtel users. In its report Nomura researchers also said that both the companies, that is, Jio and Airtel, are expected to charge premium pricing for their 5G plans. “Further, with by far the highest outlay, the quantum of incremental tariff hikes / 5G
premium is significantly higher for R-Jio (vs Bharti/Vi) and should improve the outlook on future tariff hikes / telcos’ ability to charge a premium for 5G (vs 4G),” the report said.

ICICI Securities, on the other hand, believes that the telecom companies are likely to hike the tariffs by as much as 15 percent to offset their recent spending, Telecom Talk reported.

ET Telecom reported that DoT expects telecom companies to submit around Rs 13,500 in the next 10 days as a part of the first instalment with Jio paying around Rs 7,838 crore, Airtel paying around Rs 3,834 crore, Vi coughing around Rs 1,673 crore and Adani Data Networks paying around Rs 212 crore.

It is worth noting that this is not the first time that we have been hearing about telecom companies raising their tariffs in India. The first round of tariff hikes took place in November – December last year with telecom companies hinting towards the second round of tariff hikes happening sometime this year.

“It’s possible that there could be another price hike in 2022. Certainly at some point, a price hike will take place,” Vodafone Idea CEO Ravinder Takkar had said while announcing the quarterly revenue for the third quarter of the financial year 2022.

Bharti Airtel MD and CEO for India and South Asia Gopal Vittal had similar thoughts to share. “I do expect a tariff hike sometime in 2022,” he had said earlier this year.

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