Airtel, Vodafone Idea to hike mobile services rates next month

New Delhi: Bharti Airtel Ltd and Vodafone Idea Ltd will next month raise prices of their services for the first time in more than a decade, the two companies said in separate statements on Monday.

The increase comes after a prolonged period of hypercompetition in India, where telecom tariffs are the cheapest in the world. The companies did not say by how much they plan to raise tariffs.

The move follows an adverse Supreme Court judgement that dealt a ₹92,000 crore blow to legacy telecom operators, including Bharti Airtel and Vodafone Idea, which have been struggling with mounting debt, declining revenue and record losses.

The decisions come amid reports that the government plans to introduce a floor price for telecom tariffs to prevent predatory pricing. The Telecom Regulatory Authority of India (Trai), with whom the jurisdiction on tariffs rests, is yet to receive a reference from the department of telecommunications (DoT), a senior Trai official said on condition of anonymity. Trai has so far let telecom tariffs to be determined by market forces of demand and supply.

“While continuing to provide affordable tariffs to customers, it (price hike) would balance the needs of the company to remain viable and thereby continue to invest in the much needed digital infrastructure and maintain the quality standards required by our customer,” Bharti Airtel said in the statement.

In the 24 October judgement, the top court directed telecom operators to pay at least ₹92,000 crore in past dues to the government within three months, upholding the government’s definition of adjusted gross revenue (AGR) which included revenue from non-core telecom operations such as rent, dividend and interest income, marking the end of a 14-year-long legal battle.

Following the verdict, Nick Read, chief executive officer of Vodafone Group Plc, the joint venture partner in Vodafone Idea, said, “If you don’t get the remedies being suggested, the situation is critical.” Bloomberg also cited him as saying in London that “If you’re not a going concern, you’re moving into a liquidation scenario—can’t get any clearer than that.” Read later clarified that he was misquoted

Vodafone Idea “will continue to actively invest in making its network future-fit by embedding new age technologies and launching new products/services to cater to the evolving needs of its over 300 million customers”, the firm said in a statement on Monday.

Incumbent operators, no strangers to competition, were delivered a jolt by the 2016 entry of Reliance Jio Infocomm Ltd that bundled free unlimited voice services with its cut-price data offering. The legacy companies were forced to match the tariffs and in the price war that ensued, several operators such as Reliance Communications and Tata Teleservices either went bust or had to sell out.

Finance minister Nirmala Sitharaman has said the government doesn’t want any mobile services company to shut shop.

A committee of secretaries under the cabinet secretary is considering demands of telecom companies for relief and will suggest ways to alleviate their financial stress and create a favourable investment climate. The government panel will also look into the demand of telecom companies for deferment of spectrum auction payment dues for FY21 and FY22 in order to ease cash flow as well as measures such as reducing levies, including spectrum usage charges.

At 1.17 billion mobile users at the end of August, India is the world’s second-largest market by number of subscribers.