Telecom operators are likely to go in for another round of tariff hike, analysts said, after the government agreed to convert Vodafone Idea’s Rs 16,133 accrued interest on deferred adjusted gross revenue (AGR) dues into equity at Rs 10 per share.

The conversion of dues into equity, giving the Centre a 33 per cent stake in the company, boosted the scrip of Vodafone Idea over 24 per cent to 8.60 per share. It ended the day at Rs 8.25, up 20.44 per cent.

“VIL’s announcement of the conversion of dues into equity by the Government of India increases the chances of our base/bull case scenarios (no imminent consolidation) and opens up the possibility of a tariff hike this year,” Gaurav Rateria of Morgan Stanley said in a research note said.

He said he expected hikes in 4G to take place in 2023 with the average revenue per user (ARPU) at Rs 240-250 by the end of 2024-25 against the base case of reaching the level a year later.

“Tariff hikes and the rollout of 5G will accelerate subscriber market share gains in favour of stronger players such as Bharti Airtel,” the Morgan Stanley report said.

The sectoral ARPU, when adjusted for inflation, is still 17 per cent below pre Jio launch, brokerage CLSA said.

“We factor in 20 per cent cumulative tariff hikes for Bharti, Vodafone Idea, and RJio from the fourth quarter of this fiscal to 2024-25 and forecast a 14 per cent CAGR (compounded annual growth rate) in sector revenue to Rs 2,846 billion by FY25CL,” CLSA said.

Airtel has already taken the first step by increasing the base tariffs from Rs 99 to Rs 155 in several circles, analysts said.

Vodafone Idea and Reliance Jio have not followed yet, but will inevitably raise tariffs. The trend suggests telcos are done with lowering tariffs to eat each others’ markets.

Now the telecom players want to make more money out of each customer they have acquired.

Healthier margins for the telcos would only benefit the consumers at the end of the day.

Vodafone Idea has partnered Motorola to ensure seamless 5G connectivity across its fifth-generation smartphone portfolio.