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As Airtel hikes tariffs in two circles, experts believe it will help the sector

As Airtel hikes tariffs in two circles, experts believe it will help the sector

As Airtel hikes tariffs in two circles, experts believe it will help the sector
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By CNBCTV18.com Nov 23, 2022 2:00:35 PM IST (Published)

The telecom industry still has around Rs 4.7 trillion of debt as of August 2022. 

Airtel has announced a hike in tariffs in two circles, in a move that could be good for the telecom sector, believe analysts. The second biggest telecom player in the country has hiked tariffs by over 50 percent in Haryana and Odisha. The company has raised the baseline tariff from Rs 99 to Rs 155, while the headline tariff was also increased by around 10-20 percent.

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While Airtel’s move could see revenues increase by around 2.5-3 percent, it could also prompt its competitors, especially the financially beleaguered Vodafone Idea, to raise their tariffs as well. However, with most customers in the two regions who opt for the hiked packs being 2G customers, the company is trying to ensure that 4G customers mostly remain unaffected.
“By limiting the effective tariff hike only to 2G customers, Airtel has ensured its peers cannot take advantage of the situation to poach its 4G customers,” ICICI Securities said in a research note.
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Bharti Airtel has long championed the fact that the average revenue per user (ARPU) of the telecom industry needs to be at least Rs 200, before increasing to Rs 300 per month for the sustainability of the telecom industry in the country. The company’s ARPU had increased to Rs 190, higher than Jio’s Rs 177.2 and Vodafone Idea’s Rs 131. The three telecom players last increased their tariffs in November 2021.
“If we see the other players also undertake hikes, that would be great for the industry overall. If the others also increase their prices in these circles, then we can think of hiking plan prices across the country,” an executive for Airtel told Indian Express
Tariffs in the industry are still the lowest in the world. “If there is a move by any operator to increase the base rate, then the others — Jio and VI — may follow through with a similar tariff hike in the next few weeks or months,” said Prashant Singhal, EY Global TMT Emerging Markets Leader.
The country’s heavily beleaguered telecom industry was given a lifeline last year by the government when the country launched its new telecom policy. Changes like approval for 100 percent FDI, a two-year moratorium for payments of spectrum auction, and the move had provided some relief to telecom players but the industry still has around Rs 4.7 trillion of debt as of August 2022.
 
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