Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi), the three leaders of Indian telecom sector, delivered a blow to the users when they announced a substantial tariff hike last week.
As telecom giants Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi) have implemented tariff hikes, check out how it might impact you
Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi), the three leaders of Indian telecom sector, delivered a blow to the users when they announced a substantial tariff hike last week.
The three telecom giants announced tariff hikes in the last few days across all prepaid and postpaid plans. Reliance Jio announced the move first, followed by Bharti Airtel and Vodafone Idea (Vi).
Following the change from the status quo prices, the tariff will increase by 12 to 25 per cent for Mukesh Ambani's Reliance Jio. For Airtel, prices will rise by 11 to 21 per cent while Vi has increased its tariff by 10 to 21 per cent.
Although the move will increase their average revenue per user (ARPU), the customers may think: what will be impact on their budget?
Impact on Household's Pocket
The step will prove to be winning move for the three giants. However, this will result in more money coming out of the pockets of people. Reliance Jio's basic plan costing Rs 179 per month will increase to Rs 199, while the popular Rs 479 plan, which currently offers unlimited voice calls and data, will rise to Rs 579. The annual plan's price will rise from Rs 2999 to Rs 3599.
As a consequence, the share of telecom expenditure in urban households could rise to 2.8 per cent in financial year 2025 from 2.7 per cent in FY24. Rural households will see the share rise from 4.5 per cent to 4.7 per cent from, according to the Axis Capital report cited by the Business Standard.
Despite this, market experts predict that it is unlikely to affect customer base as the demand for telecom services remains largely the same. However, customers will face a pinch on their household budgets in the coming months.
Why the Tariff Hikes
The move came after the recent development in spectrum auction where the government received bids worth Rs 11,340 crore for the 5G spectrum. It is only 12 per cent of the government’s reserve price of Rs 96,238 crore. In comparison to the sale of over 50,000 MHz in the 2022 auction, this year it was only 140 MHz.
As per market experts, the changes in the tariff structure will likely improve the financial health of the telecom companies in India as the country currently has the lowest data charges in the world. On average, 1 GB of data in India costs $0.17 (Rs 14.2) which is much lower compared to the average in United States which stood at $5.62 (Rs 469.32) in 2023.
Industry leaders in the telecom sector had been calling for tariff hikes for a while now. During the post result analyst call for Q4 FY24, Bharti Airtel CEO Gopal Vittal had said that India needs "tariff repair". "Our pricing and tariffs are at an absurdly low level relative to any other part of the world. So, tariff repair is needed for return ratios to improve, it doesn’t matter which technology it comes from," he said.
Revenue per user is expected to see a rise in the current financial year for the companies following this move. The ARPU for FY24 of Jio, Airtel and Vi was Rs 181.7, Rs 209 and Rs 146 respectively.
CareEdge Ratings projects that the revised tariffs will boost the blended average revenue per user by about 15 per cent, reaching Rs 220 in FY25 from approximately Rs 191 in FY24.