Reliance Jio has forced the other telecom operators to bleed profit margins in trying to match its dirt cheap tariff offers. But no more, telecom companies Bharti Airtel and Vodafone Idea seem to be saying now.
The upcoming month of December could be the month when India’s largest incumbent telecom operators finally break free of the clutches of high intensity competition by Reliance Jio. Mukesh Ambani’s relatively newer entrant in the Indian telecom industry has forced the other operators to bleed profit margins in trying to match its dirt cheap tariff offers. But no more, telecom companies Bharti Airtel and Vodafone Idea seem to be saying now. Both Airtel and Vodafone Idea on Monday said they will raise mobile services tariffs from the month of December 2019 to remain viable and recoup from financial stress.
The telecom sector requires continuous capital investments to keep up with the fast changing technology cycles, Bharti Airtel said. “It is, therefore, extremely important that the industry remains viable to support the vision of Digital India,” the Sunil Mittal-company said in a statement, adding that it will raise the prices of its services in the month beginning December.
On the other hand, Vodafone Idea, also reeling under severe financial stress, said: “To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019.” Most mobile telephone service providers in India, including Bharti Airtel and Vodafone Idea, offer voice and data bundled plans, where the tariff rises progressively in line with the data bandwidth and speed, whereas voice calling is unlimited.
Bharti Airtel and Vodafone Idea tariff hikes come as the Indian telecom industry posted a record quarterly loss. Vodafone Idea posted a loss of Rs 50,921 crore for the July-September quarter, owing to provision for the Supreme Court’s ruling on payment of AGR dues, even as ongoing brutal pricing war continued to hurt. This was the highest ever quarterly loss posted by any company in India. In the year-ago period, the telco recorded a loss of Rs 4,947 crore. Even Bharti Airtel recorded a loss of Rs 23,044 crore for the quarter ended 30 September 2019 due to Rs 28,450 crore provisions towards AGR.
The government last week sent notices to all the telecom operators and internet service providers to pay their license fee and spectrum usage charge dues to the government as per the definition of what constitutes adjusted gross revenue given by the Supreme Court in its order dated October 24, 2019. In addition, dismal Q2 earnings have also fueled the troubles for the past and existing telecom firms.
Meanwhile, earlier in the day, Cellular Operators Association of India (COAI) Director General Rajan Mathews told PTI that the government should grant telecom companies a three-year moratorium followed by an extended timeline for payment of all statutory dues at easier interest rates, as the telecom sector is reeling under massive losses after the Supreme Court ruling on AGR liabilities. The telecom operators need “oxygen” and urged the government to take a call on debt restructuring of all the dues that telecom operators owe to the government. Shares of Vodafone Idea closed at Rs 4.47, up 0.79, or 21.47 per cent on NSE.
- First published on www.financialexpress.com on Monday, 18 November 2019