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MarketScreener Homepage  >  Equities  >  NSE India Stock Exchange  >  Vodafone Idea Limited    IDEA   INE669E01016


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Vodafone Idea : Indian telecoms operators raise tariffs to offset losses

12/02/2019 | 02:46am EST

New Delhi, Dec 2 (EFE).- India's main mobile and internet operators have raised their tariffs, by around 20 percent in the case of Vodafone Idea, to recover from the million-dollar losses they have accumulated after years of a price war in a country, which has among the lowest rates in the world.

Vodafone Idea, one of the largest companies in India, announced new tariffs and plans for its prepaid services and products on Sunday.

Customers will now have to shell out Rs149 ($2) for one of the most basic packs, which includes unlimited calling and 2GB of data for 28 days, almost 15 percent more than the earlier price. In other plans, the hike is even higher.

Bharti Airtel, another of the three largest telecom operators in the country, has also released new tariffs.

From Dec. 3, its Indian customers will have to pay Rs148 - in place of the earlier Rs129 - for its 28-day unlimited calling pack with 2GB data a day.

The aim of both companies is to offset their financial situation, exacerbated by the price war triggered by the entry of Reliance Jio Infocomm onto the telecoms market.

The two companies were forced to reduce their tariffs in order to prevent their customers from switching to Reliance Jio, which was launched in September 2016 by Mukesh Ambani, the richest person in the country.

According to the latest data of watchdog Telecom Regulatory Authority of India, released in the middle of November, Reliance Jio already has over 355 million customers.

This makes Ambani's company the second largest telecoms company in India in terms of users, behind Vodafone Idea (375 million) and ahead of Bharti Airtel (325 million).

The sharp fall in tariffs caused the previously dominant operators, in September this year, to post losses of Rs497,274 billion in case of Vodafone Idea and Rs245,135 billion in case of Airtel, according to the data provided by the companies to the Bombay Stock Exchange.

These companies "had to invest in 4G networks throughout India and that hit their profits while Jio was the only one that had a full 4G network," an analyst from Counterpoint Consulting, Parv Sharma, told EFE.

Sharma does not believe that the price hike will result in further loss of customers for Vodafone and Airtel because they are "still serving around 300 to 400 million 2G users."

But mainly because Jio will also have to increase its tariffs following a recent verdict by the Supreme Court.

At the end of October, the country's top court ruled that the license fees and spectrum usage charges (SUC) the telecoms operators pay to the government should be calculated according to all the revenue they generate.

The ruling ordered the companies to clear the shortfall in SUC along with interest and penalties for the past 15 years, when the legal battle began, which will lead to multi-million dollar expenditures for the companies, especially Vodafone Idea and Airtel, according to the expert.

"Like other operators, we will also work with the government and comply with the regulatory regime to strengthen the industry to benefit Indian consumers and take measures including appropriate increase in tariffs in next few weeks," Ambani said a few days earlier, according to local newspaper The Economic Times.

Against this backdrop, Sharma believes the government "might introduce some incentives in the sector including floor pricing," which Airtel and Vodafone have been proposing should be implemented, as the "government does not want a monopoly or a duopoly in the (telecoms) market."

"Even if they increase prices by 10 to 15 percent, the users, years back, used to pay much more than this. Clients (will) have to accept this," Sharma concluded. EFE

© 2019 EFE News Services (U.S.) Inc., source EFE Ingles

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