Telecom operators are likely to hike tariff by about 20 per cent before the year-end or early next year to boost their revenues as economic activity has shown signs of picking up and demand for data has gone up.
A 20 per cent tariff hike could drive up Vodafone Idea’s average revenue per user (ARPU) to Rs 140 in 2021-22, a report by Motilal Oswal said on Wednesday. Bharti Airtel may follow suit but both will closely watch rival Reliance Jio’s moves and calibrate their rates accordingly.
This is on the expected lines as the firms are struggling with cash burn and are trying to raise funds, analysts said.
After the second-quarter results were out, Ravinder Takkar, Vodafone Idea (Vi) CEO, told analysts that “ongoing consultations around floor price (for data rates) doesn’t stop anyone from hiking tariffs, but the timing has to be right... the tariff hike decision is not far away”.
However, Airtel CEO Gopal Vittal said while they would hike the tariff, it will surely not be the first operator to do so and will follow its peers.
The report said Vi requires an ARPU hike of 74 per cent to achieve an EBITDA of Rs 300 billion to address its cash obligation sustainably in 2022-23, including the deferred spectrum payments. Vi also needs to arrest its subscriber churn to realise the benefit of the price hike, said the report.
Motilal Oswal maintains Vi under “review” because of its liquidity crunch and limited clarity on business continuity. A 20 per cent hike could raise Airtel’s and Jio’s ARPU to Rs 178 and Rs 167, respectively.
