Your phone bill may get expensive in next fiscal; telecom companies may raise tariffs to boost revenue

The telecom companies may see revenue growth of 13 per cent due to improved ARPU, and high data usage in the next fiscal year. The telecom companies may once again raise tariffs in the months to come, which will drive the sector’s revenue, said a report by rating agency ICRA. Further, there has been an increase in the usage of telecom services, which has been accelerated by work from home and increased content watching. The higher usage is likely to persist, the report added. Also, with increased data requirements, subscribers are upgrading from 2G to 4G, resulting in the expansion in ARPU levels and this trend is likely to continue as well. 

On one hand, where the revenues are expected to rise, on the other hand, the debt levels in the telecom sector are also expected to moderate. Sizeable deleveraging led by rights issues, QIP issuance, and additional sponsor fund infusions in the last fiscal, led to a reduction in debt levels. Consequently, the debt levels fell to Rs 4.4 lakh crore as on 31 March 2020, from Rs 5 lakh crore as on 31 March 2019. 

The government’s support is also likely to support the sector. In November 2019, the government had offered financial succour in terms of deferment of spectrum auction instalments for FY21 and FY22. Further, the introduction of floor tariffs for data, reduction in levies, and more relaxation in spectrum payments are the possible supports the sector may expect. 

Meanwhile, it is to be noted that the telecom sector had a minimal impact of the lockdown, being characterized as an essential service. Initially, the impact was on account of lack of physical recharges and extension of incoming facilities provided to the low ARPU subscribers. However, with the increased usage and impact of the first round of tariff hikes, the industry AGR improved substantially in H1 FY21, and the growth is likely to continue.