Leading Telecom Companies Raise Prices to Monetize 5G and Strengthen Financial Health
Key Points:
- Tariff Increases Announced: Jio, Airtel, and Vodafone Idea raise tariffs within hours of each other.
- Significant Hikes: Jio's tariffs rise by 12-25%, Airtel by 11-21%, and Vi by 10-20%.
- Effective Dates: New prices start from July 3 for Jio and Airtel, and July 4 for Vi.
India's top three telecom operators, Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi), have all announced tariff hikes, marking a significant move to monetize their 5G services and improve the financial stability of the sector.
Details of Tariff Hikes:
- Jio: Raised tariffs by 12-25%, with the highest increase in premium plans. The popular 28-day plan with 1.5 GB of daily data saw a 25% hike.
- Airtel: Increased prices by 11-21%.
- Vi: Hiked tariffs by 10-20%.
These new rates will take effect from July 3 for Jio and Airtel, and July 4 for Vi.
Why the Price Increase?
- ARPU Target: The goal is to raise the Average Revenue Per User (ARPU). Airtel stated the need for an ARPU above INR 300 for a sustainable business model. As of March 2023, Airtel's ARPU was Rs 209, Jio's was Rs 181.70, and Vi's was Rs 146.
- Historical Context: Jio's 2016 launch of free 4G services led to extremely low data rates in India, causing a surge in online users. However, the industry now seeks gradual price increases to ensure financial health.
- Post-Election Timing: Analysts predicted price hikes after the general elections. Airtel aims for an ARPU of Rs 280 by FY26 and Rs 300 by FY27.
Monetizing 5G:
The introduction of 5G services required significant investment from telecom companies. Initially, 5G was offered at the same rates as existing services, but now companies are looking to monetize these new capabilities.
- Jio's Strategy: Jio's tariff hikes indicate a shift from gaining market share to monetizing 5G services. For example, Jio increased the threshold for unlimited 5G data from 1.5GB/day to 2GB/day, resulting in a 46% increase in tariffs for 5G users.
Recent Spectrum Auctions:
The recent spectrum auctions saw a lukewarm response, generating just over Rs 11,340 crore for the government, far below the reserve price of Rs 96,238 crore. In contrast, telecom companies had spent over Rs 1.5 lakh crore in 2022 to acquire 5G spectrum.
By raising tariffs, these telecom giants aim to balance their investments and ensure long-term sustainability in a competitive market.