Telecom consumers must brace for another round of tariff hikes after the general elections and mobile operators are looking to improve their average revenue per user.

However, experts believe that telcos will need to follow a differential pricing strategy for entry level to ensure that low-income consumers are not forced to give up their mobile plans. 

20% hike in prices

After nearly two years of stable telecom tariffs, brokerage firms predict that telcos will take another 20 per cent hike in telecom prices. In January, Bank of America Securities upgraded Bharti Airtel’s ratings expecting a significant tariff increase after a two-year hiatus. India has the cheapest telecom tariffs in the world, and increasing telecom prices has been a catch-22 for telcos, as Bharti Airtel, Reliance Jio, and Vodafone Idea followed the race to the bottom strategy for pricing to garner subscribers. This has come at the cost of margins for telecom operators, especially Vodafone Idea which has been facing liquidity issues for many years. 

As telecom operators increased capital expenditure to set up the 5G network last year, it became important for them to take tariff hikes, which they have not been able to take as elections loom near. However, brokerage firms have stated that telcos will take tariff hikes post July, ranging from 15 to 20 per cent. 

In the winter of 2021, telecom operators had taken tariff hikes on entry level and postpaid plans. businessline did a report in February 2022, which found that millions of consumers were forced to give up their mobile subscriptions as a result. Data by the Telecom Regulatory Authority of India found that 1-2 million subscribers dropped their mobile phone subscriptions in Madhya Pradesh, Maharashtra and Andhra Pradesh. 

While experts at the time said that many of these lost subscriptions were secondary sim cards of consumers who were on mobile plans of two operators, entry level subscribers likely also faced the brunt of these tariff increases. At the same time, Reliance Jio carried a culling exercise to improve the quality of their subscriber base, disconnecting “inactive subscribers,” or pre-paid subscribers that had not renewed their subscriptions for a few months. These subscribers are usually low-income customers, like migrant laborers, underemployed workers that can only afford luxuries like phone connectivity when they get a paycheck or have to send money back home. 

Consumers at the edge of the poverty line will be affected by these tariff hikes. Faisal Kawoosa of TechArc explained, “Most high- or middle-income consumers will not be affected by these tariff hikes. They have already optimised for rising telecom tariffs by removing their secondary sim or reducing the number of mobile plan subscriptions per household. But low-income consumers will see impact.”

Use of AI

Kawoosa believes that telcos will need to be more circumspect on how they raise their tariffs to ensure that low-income customers are not affected. “Telcos can use AI, or provide voice only plans to differentiate customers at the entry level. Ensure that they are still able to afford mobile connectivity.”

Keeping entry level subscribers connected is essential because it could impact the delivery of government services. Many government programmes are linked to Aadhar which, in turn, is linked to the phone.