Mobile Phone Users Brace For Minimum 10% Hike In Bills: Here's Why

Even as the Supreme Court in its AGR related verdict pronounced yesterday allowed a timeline of 10 years to telcos to clear their outstanding dues in a staggered manner, the stance is said to be rather strict. Worth mentioning here that after the scope of AGR or adjusted gross revenue was broadened to include non-telecom revenues, the department of telecom (DoT) in March this year approached the SC for allowing over 20 years timeline to make AGR dues repayment.

Mobile Phone Users Brace For Minimum 10% Hike In Bills: Here's Why

And the final decision as it comes, the SC has even asked telcos to clear 10% of their AGR dues by March 31, 2021 and the remaining in installments over the 10 year period starting April 1, 2021, by the 7th of February every year. Implying Bharti Airtel will need to make a payment of about Rs. 2600 crore, while the crisis-ridden Vodafone Idea would need to pay out Rs. 5000 crore by March next year. And this as per brokerage Jefferies' estimates would require ARPU or average revenue per user to shoot higher by 10% in case of Airtel and by 27% for Vodafone Idea. For the just ended quarter, ARPU for Airtel and Vodafone Idea had been at Rs. 157 and Rs. 114, respectively.

This simply calls for a minimum 10% hike in tariff in the short term. "In our view, another round of minimum 10% tariff hike is likely in the near term," said Jefferies.

Jefferies said, "Vodafone Idea may need additional support from the government in the form of a further two-year moratorium on deferred spectrum liabilities to remain solvent beyond FY23."

Moreover as per Sanjay Kapoor, Entrepreneur & TMT Advisor, though the call to raise tariff on mobile phone services was not directly associated with the AGR verdict, the latest SC decision presses on the need to bring about the same in the near term.
"Keeping spectrum costs and other investments aside, service providers need an ARPU of at least $3-4 in the near future for the capital expenditure required to provide for the surge in data usage. Therefore, there should be a significant tariff hike in the next quarter," he added.

In December last year, telecom service provides amid the AGR row had for the first time in 4 years increased tariff rates by up to 40%, which resulted in earnings growth for the companies by as much as 20% in H1CY2020.

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