Mobile call, data to cost more as Vodafone-Idea, Airtel to hike rates

Mobile call, data to cost more as Vodafone-Idea, Airtel to hike rates from December

Vodafone Idea and Bharti Airtel said they would increase tariffs in December, the first price hike in more than three years that could help shore up revenue and operating income for the two lossmaking telecom companies but also cause some subscribers to shift to rival Reliance Jio Infocomm.

In separate statements on Monday, Vodafone Idea and Airtel cited the financial stress in the sector, the current low tariffs and the need to invest in networks to keep up with surging data demand as the reasons for the move. The companies have for some time been saying that higher prices and lower government levies were crucial to improving the health of the sector bogged down by huge debt and intense competition.

They didn’t declare the quantum of the hikes, which some analysts said could be as much as 30-45% in the near term and up to three times the current rates over the next two years.

Jio, the entry of which three years ago offering low tariffs had roiled the market and trigged a price war, didn’t immediately respond to the announcements. It had recently started charging 6 paise a minute for calls made to a rival’s network and removed some low-priced plans to improve its operating performance.

We understand that Trai (Telecom Regulatory Authority of India) is likely to initiate a consultation for bringing rationality in pricing in the Indian mobile sector, which has been operating at prices that have been eroding the viability of the sector, Airtel said in a news release.

The telecom sector is highly capital-intensive with fast changing technology cycles that require continuing investments, and hence it is important for the industry to be viable, it said. “Accordingly, Airtel will appropriately increase price offerings in the month beginning December.”

Vodafone Idea, which was the first to announce the planned price hike on Monday, said the government had acknowledged the stress in the sector, weighed by debt of more than Rs7 lakh crore and brutalised by the price wars since Jio’s entry.

“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 … To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective 1 December 2019,” it said.