India’s mobile phone consumers may have to bid farewell to the current low-tariff regime and shell out more for calls and downloads as telecom companies contemplate raising tariffs.
In the latest development, Bharti Airtel’s chairman Sunil Mittal said the company won’t shy away from raising tariffs. At an investor call, Mittal said: “People are consuming an average of 16GB of data per user per month. It is time that tariffs do take a tick up to make the industry viable and, more importantly, have decent and appropriate returns on capital to grow into more technology areas, to roll out more networks and become a more viable model of sustainability in the future.”
Mittal rued that “for far too long, we have played in this game by growing this industry at a very minimal pricing level.” On being asked if Airtel would take a lead in raising tariffs in the future, Mittal said the company had already been doing it in a limited manner by pushing up base tariffs to 79 rupees.
“Can this go to 99 rupees eventually, my answer is yes, the question is when … In the end, we are also bound by market forces, we can’t be outliers beyond a point. You can be having some premium given strength of the brand but you can’t go beyond a point where you start to hurt yourself,” Mittal observed.
Bharti Airtel’s average revenue per user was 146 rupees for the quarter ended June and Mittal expects it to inch up to 200 rupees by the end of this financial year and eventually touch 300 rupees.
In a related development, Fitch Ratings said tariff hikes are imminent and they were delayed due to the Covid-19 pandemic. It observed that tariffs were low in India when compared with other regional markets.
Troubled telecom operator Vodafone Idea has been pitching to fix a floor price for voice and data tariffs. However, telecom watchdog the Telecom Regulatory Authority of India rejected the demand, but urged the government to provide relief to the sector.
High taxes
Mittal also lamented that the taxes and levies imposed on the industry were very high and were “inhibiting” continued investments in the sector. “For every 100 rupees of revenue, 35 rupees go in various forms of levies. We hope that as we step up and do our part, the government will also favorably look at some of the genuine demands of the industry, enabling a multiplier effect and positive outcome,” he said.
Rights issue
The Bharti Airtel Chairman said its 210 billion rupee fundraising plan through a rights issue will be channelized in areas such as 5G, fiber and data center businesses. The company has the opportunity “to be the tip of the spear for the new digital economy and take India into the next phase of growth,” he added.
The rights entitlement ratio entails one equity share for every 14 equity shares held by eligible shareholders as on the record date – to be notified later. The promoter holding in the company stands at about 55.8%, while the public holds 44.09%. The company has informed it will also subscribe to any unsubscribed shares in the issue.