Big tariff shifts unlikely in short run as telcos focus on market share gains: Deloitte India analyst

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August 22, 2021 2:33 PM

Some industry watchers, in fact, have been warning that the sector may be heading for a duopoly, in the absence of any relief measures that could help the crisis-hit Vodafone Idea Ltd.

Vaish believes that the government is unlikely to intervene in the floor price issue.

Telecom operators are likely to continue with minor tweaks in mobile plans but may avoid significant hike in broader tariffs in the short-run, as they prioritise market share gains amid ongoing sectoral challenges, according to a senior analyst at Deloitte India.

Deloitte India, Partner and Telecom Sector Leader, Peeyush Vaish told PTI that despite ongoing challenges, the telecom sector offers headroom for growth, particularly in areas such as broadband as well as 5G, whose advent is expected to spur enterprise revenue streams for telcos.

“Till now, the operators were rolling out products that were one-size-fits-all, but over the last 6-8 months, they have started to identify premium subscribers and are looking at how to tap into these segments of users, who can pay more for added convenience or services,” he said.

As a result, while some marginal tweaks in tariffs may happen in specific pockets, a broader tariff hike is unlikely in the short-run, he added.

“I do not believe we are seeing any big tariff movement in the short run. There may be marginal fixes, some operators may drop their lowest end plan… but I don’t think it will lead to significant shifts in the blended ARPUs (Average Revenue Per User) of operators,” Vaish noted.

Instead, the telecom operators may choose to focus on grabbing subscriber base to enhance their market share.

“Anyway, given that tariffs are likely to see a shift in the 5G environment, why would operators want to disrupt the apple cart, in the short run,” he argued.

Any significant hike in tariffs now may be disruptive for operators rather than the market, he contended. “If something untoward happens in the industry in the next 3-4 months, then the focus of the remaining operators will be to tap into the subscriber base,” he said.

Vaish believes that the government is unlikely to intervene in the floor price issue.

He further said that while so far a major portion of revenue earned by telecom operators has been in the retail segment, that mix may change with 5G coming in.

“With 5G, we may see a lot of revenue being generated from the enterprise segment, say, in applications like education, e-health. That could be a larger source of revenue for telcos,” he said.

The comments come at a time when the telecom industry, under the aegis of apex association COAI, is pushing for a cut in levies and other relief measures to address viability concerns.

The Cellular Operators’ Association of India (COAI) recently wrote to Telecom Secretary Anshu Prakash, amid an existential struggle of mobile operator Vodafone Idea in a three-private-player market.

The association highlighted that telecom remains one of the most heavily taxed sectors, and added that the government needs to recognise that the current revenue sharing regime of around 32 per cent of revenue outgo as taxes and levies is “unsustainable”.

Such high incidence of levies would be detrimental to growth of the industry due to perennial lack of surplus cash to reinvest, the industry has contended.

Some industry watchers, in fact, have been warning that the sector may be heading for a duopoly, in the absence of any relief measures that could help the crisis-hit Vodafone Idea Ltd.

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