India: Low mobile tariffs end; Big 3 Telcos increase rates by 40-50%

by CanIndia New Wire Service (edited for accuracy and clarity by Alan J Weissberger)

The long honeymoon for India telecom subscribers has come to an end as all the three private wireless telecom network providers — Vodafone Idea, Bharti Airtel and Jio — on Sunday announced pre-paid tariff plans with 40-50 per cent higher rates.  The hike comes after three years and amid the acute financial stress the sector is going through after a Supreme Court ruling on adjusted gross revenue. The hikes, however, come with enhanced data and other benefits.

Editor’s Note:

India is currently the world’s second-largest telecommunications market (China is number 1) with a subscriber base of 1.20 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). As of January 2019, India has experienced a 165 per cent growth in app downloads in the past two years.

Image result for images: telecom in India

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Reliance Jio, the last one to announce a revised rates on Sunday, said it would raise tariffs by up to 40 per cent. “Jio will be introducing new ‘all-in-one’ plans with unlimited voice and data. These plans will have a fair usage policy for calls to other mobile networks. The new plans will be effective from December 6,” Jio said.

“The new ‘all-in-one’ plans will be priced up to 40 per cent higher, staying true to its promise of being ‘customer-first’, Jio customers will get up to 300 per cent more benefits,” it said.

Airtel’s new rates will be effective from December 3. After December 3, the Rs 129 pack for 28 days with unlimited calling, 300 SMS, and 2GB data would cost Rs 148, it said.

A major hike is witnessed in Airtel’s Rs 998 plan with 336-day validity, unlimited calling, 3,600 SMSs and 12GB data. It would be replaced by a Rs 1,498 plan, marking 50 per cent rise, with 24GB data and 365-day validity.  The users of Rs 1,699 plan would have to pay Rs 2,398, which is an increase of 41 per cent. It would continue to offer unlimited calling, 100 SMS and 1.5GB data per day.  Airtel had merged Rs 169 and Rs 199 plans for 28 days to offer a Rs 248 plan with same benefits — unlimited calling, 100 SMS and 1.5GB data a day.

The Rs 249 plan, which offered unlimited calls, 100 SMS and 2GB data a day, would now cost Rs 298. The Rs 448 and 499 plans for 82 days would now cost Rs 598 and Rs 698 for 84 days.

“Airtel’s new plans represent tariff increases in the range of 50 paise a day to Rs 2.85 a day and offer generous data and calling benefits. Airtel also provides exclusive benefits as part of the Airtel Thanks platform, which enables access to premium content from Airtel Xstream (10,000 movies, exclusive shows and 400 TV channels), Wynk Music, device protection, anti-virus protection and much more,” it said.

The revised Vodafone Idea tariffs too would come into effect from December 3. It has launched ‘First Recharge Packs’ where the four first recharge packs will cost Rs 97 with Rs 45 talk time, 100MB data and voice calls charged at 1 paisa per second along with 28 days validity. Other plans include Rs 197, Rs 297 and Rs 647. They offer up to 1.5GB data a day and unlimited ‘on-net’ calling for 84 days.

Vodafone Idea announced that the ‘on-net’ voice calls would be billed at 6 paise per minute. The ‘on-net’ voice calls after the provided FUP limit will be charged 6 paise per minute, similar to Reliance Jio. It is also providing bundled ‘on-net’ minutes, whereas Jio will be charging customers for IUC ‘top-up’ vouchers.

In unlimited packs with 28-day validity are — Rs 149 plan with unlimited voice (FUP of 1,000 minutes for off-net calls), 2GB data, 300 SMS; Rs 249 plan with unlimited voice (FUP of 1,000 minutes for off-net calls), 1.5GB data, 100 SMS per day.

The company has removed the All Rounder packs and introduced two Combo Vouchers of Rs 49 and Rs 79 with 28-day validity. It has announced new prepaid plans with 2 days, 28 days, 84 days, 365 days validity, and broadly compared with existing plans of similar nature. However, new plans are costlier up to 42 per cent.

Vodafone Idea had earlier said it would increase tariff in December. The announcement has come in the backdrop of its highest quarterly loss of Rs 50,922 crore.

It’s now expected that the state-run BSNL could also hike tariffs. The government and the Telecom Regulatory Authority of India (TRAI) have made it clear that there will be no floor rate for voice or data and the telcos would have to thrash out pricing among themselves to cover up losses.

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References:

The original (unedited) article was first published at:

Low tariff regime over, telcos up rates by 40-50% (Roundup)

Also see:

Mobile call, internet to become costlier in India by up to 50% from Dec 3rd

https://telecom.economictimes.indiatimes.com/news/biggest-telecom-tariff-hike-to-bring-40-higher-bills/72324808

One thought on “India: Low mobile tariffs end; Big 3 Telcos increase rates by 40-50%

  1. 5G WEAK SIGNAL, by Suman Layak
    1 December 2019 The Economic Times – Delhi Edition

    Copyright © 2019. Bennett, Coleman & Co., Ltd.

    The plan to conduct 5G spectrum auction early next year seems unrealistic, given the battering in the telecom space and the paucity of viable use cases for the next-gen network

    The National Company Law Tribunal courtroom of MK Shrawat and CB Singh in Mumbai was empty on the afternoon of November 27, though a vital order for the beleaguered telecom sector was due that day. The court was to decide whether Aircel, the insolvent telecom operator, could retain the right to use its allotted portion of airwaves, and make it count as an asset in the ongoing debt-resolution process.

    The order was finally available on the website past midnight, around 12.30 am on Thursday. It said, much to the relief of Aircel’s creditors, the Department of Telecommunication (DoT) could not take away the telecom spectrum from the bankrupt company.

    The implications of the order went beyond Aircel: the Anil Ambani-promoted Reliance Communications had filed for bankruptcy in February. The DoT had wanted to take back spectrum from mobile telephone service operators who have not paid their dues so that it can reauction them. For telecom players, the right to use spectrum for the licence period is an asset that they can transfer to other bidders.

    Like the court of Shrawat and Singh, multiplied to ?7.64 lakh crore from ?2.8 lakh crore in the same period. At the same time, there is consumer dissatisfaction over low-quality network. While some companies are in the bankruptcy courts, Airtel and Vodafone are trying to deal with a ?92,000 crore blow from the Supreme Court in a 16-year-old case related to revenue calculation.

    It does not bode well for the sector that it has to deal with these issue at a time when the world is talking about adopting much of Indian telecom sector is today burning the midnight oil to figure a way out of the mess it finds itself in. From 10 private sector telecom operators not so long ago, India now has only three major mobile telecom players – the Sunil Mittal-led Bharti Airtel, the Aditya Birla Group and Vodafone Group venture Vodafone Idea and Mukesh Ambani’s Reliance Jio. A battle of attrition over tariff between the three, after Reliance Jio entered the market and grabbed almost a third of the market share, has seen the operators’ cash flows shrink rapidly over the past three years. The industry’s annual revenues have largely been stagnant since FY2015, while cumulative debt has 5G technology – the next generation of super-fast wireless communication technology. South Korea has already rolled it out in Seoul and Indian companies were about to start their own pilot projects. Union Telecommunication Minister Ravi Shankar Prasad had said the government plans to auction extra spectrum for 5G services by early next year. However, this seems to be the worst of times for 5G rollout.

    Talking of 5G now when every company is haemorrhaging cash, says a former CEO of an Indian telecom company who didn’t want to be named, is akinto Nero playing the fiddle while Rome was burning.

    Sanjay Kapoor, former CEO of Bharti Airtel, says the enthusiasm for 5G across the world is being driven by equipment makers, like Huawei, Nokia and Ericsson, and the governments, but the device ecosystem is still lagging. “Use cases for 5G have to be fully developed for every market and then monetisation plans have to be worked out. There is much work left to do,” he says.

    Despite the challenges facing the sector, the government’s plan to auction airwaves would open the supply taps. A total of 8,644 MHz of airwaves might be put up on offer, though the previous spectrum auction saw poor response. In 2016-17, the government could sell only 41% (965 MHz) of the spectrum on offer. It raised about ?65,000 crore though the base price of the entire spectrum value on the block was pegged at ?5.6 lakh crore. A mega-auction has been in the works for some time now, along with spectrum for 5G technology, in the 3,300-3,600 MHz band.

    For the upcoming auction, the Telecom Regulatory Authority of India has suggested a base price of ?492 crore per MHz for 5G spectrum. Operators are almost unanimous that they would need 100 MHz each to roll out 5G, which means they would have to pay nearly ?50,000 crore each for the spectrum fee alone. This would make it the highest priced 5G spectrum in the world.

    Despite the abundance of supply, demand during auction might be low due to other problems. Aircel and Reliance Communications will not participate as they are in insolvency courts. Airtel, Vodafone Idea and others are dealing with the massive financial blow after the Supreme Court in October ruled that licence fees of operators need to be calculated on the basis of their adjusted gross revenues, and not their telecom revenues alone. In an attempt to give some relief to the companies struggling with high debt and huge losses, the government then announced a two-year moratorium on payments of spectrum dues.

    For Bharti Airtel, the ruling means an additional burden of ?35,000 crore on pending dues. Vodafone Idea has dues of around ?53,000 crore. Vodafone Global CEO Nick Read had in November reportedly hinted at virtually writing off the India investments, although he retracted and apologised a day later.

    Bharti Airtel has moved a petition in the Supreme Court seeking permission to negotiate with the government to find a way to reduce the burden. Vodafone has also moved the court for relief.

    The third operator, Mukesh Ambani-promoted Reliance Jio, has much lower dues at ?60 crore, mostly because it is a recent player and has already paid a part of the dues. However, sources say, Reliance Jio might also go slow on 5G.

    For the quarter ended September 30, Bharti Airtel posted a loss of ?23,044 crore and Vodafone Idea reported a loss of ?50,921 crore. Jio posted a 45% rise in profit at ?990 crore.

    Reliance Jio, Vodafone Idea and Bharti Airtel did not respond to queries.

    Chairman of Inditrade Capital and market analyst Sudip Bandyopadhyay points out that while the government has announced a moratorium for spectrum payments to help the industry, it cannot expect a good spectrum auction at the same time. “It is best for the government to not do 5G auctions now, because if it does, who is going to buy? And how will it get a good price in this kind of a market? Even if Reliance Jio participates, it will get the auction at a low price and will be able to hoard it.”Much of the woes of the telecom sector, including the bankruptcy of some of the operators, can be traced back to the entry of Reliance Jio and the tariff battle that followed. However, Reliance Jio, after gaining about one-third of the market, has now raised tariff, signalling an end to the battle.

    Director General of the Cellular Operators Association of India (COAI) Rajan Matthews says the sector needs time to settle down. “We do not believe that the time is ripe for 5G auctions. The concerns around financial health of the sector must be resolved immediately. Hence, we are of the view that the government should not rush to spectrum auctions and should wait for the market to settle down.”A Tech PuzzleBeyond the financial issues, the sector is also facing technical problems.

    Kapoor, who sits on the board of Saudi Telecom, which launched 5G services in Saudi Arabia in June, says the road to 5G is complex in India. He lists out a few necessary changes that Indian operators must implement first before looking at the next-gen technology. Much of the margins in 4G were taken away by the content players who rode on the bandwidth, he says. For 5G, the telecom operators need to get this margin balance right. Also, he says, a big difference will be that 5G is likely to have more focus on B2B operation, and the operators will need to set up a fresh marketing machinery to sell the same. There would be manufacturing and service sector applications, like robotics or tracking and even financial sector applications, in 5G.

    On the technical front, Kapoor points out that 5G is a higher speed network with low latency (the time it takes for a request for data to reach the server and for the data to reach the user). This allows it to be used for critical applications, such as driverless cars, which need a strong fibre network connection. There cannot be any dark spots in the network for such applications. “Complete coverage across India may be uneconomical,” Kapoor says, adding that while inter-city fibre may be available, India lacks enough intra-city fibre.

    High InvestmentPrashant Singhal, technology, media and telecommunication leader for emerging markets at EY, says the investments that need to go in for 5G in India are likely to be much higher than those for 3G or 4G networks and there is no need to rush into it. “The 4G auctions had happened in 2010 and the rollout happened only by 2015-16. We do not want such a situation in 5G also,” Singhal cautions.

    E&Y has estimated that it would cost $100 billion or so to launch 5G in India. The government has announced a moratorium on spectrum fees payments and has asked the GST Council to help lower the tax burden. Given this situation, Singhal says, where is the question of doing a successful spectrum auction, leave alone a 5G launch.

    To be sure, work has already started on trials and development of 5G use cases. Ericsson has set up Centre of Excellence and Innovation Lab for 5G at the Indian Institute of Technology-Delhi. Intel has inaugurated the Intel Design Center, its new R&D facility for 5G and artificial intelligence, in Bengaluru. The DoT in June flagged off 5G trials, stating the trials would go on for a year. But the early-2020 target for 5G spectrum auctions looks impossible to achieve. “India can and will adopt 5G in good time,” adds Matthews of COAI.

    Bennett, Coleman & Co., Ltd.

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