Competing telcos put tariff hikes in abeyance

With Bharti Airtel and Reliance Jio locked in competition over subscriber addition and Vodafone Idea continuously losing customers for the past few months, the prospects of any tariff hike by the telcos in the near term has faded away.

The last tariff hike was done by the three operators in December 2019 and 2020 will end with no hike and at least the first quarter of calendar 2021 is also unlikely to see any hike, industry executives said.

Some prospects of a limited tariff hike was seen earlier this month when Vodafone Idea had hiked tariffs for two of its post-paid plan by Rs 50 in the UP east circle. However, on closer examination it was found that the company’s tariff in one of the packs was lower than Bharti’s and it closed this gap.

Vodafone had a Rs 749 per month post-paid plan where the price was raised to Rs 799, while in another plan of Rs 598, the price was hiked to Rs 649. It was assumed that Vodafone Idea which desperately needs to hike tariffs but is constrained due to the status quo position maintained by Bharti and Jio, may do slight tweaks in some post-paid plans in some circles.

The tweaks will help the company to test waters as there’s more stickiness in post-paid users and may improve its realisation.

The stance of Bharti and Jio on maintaining status quo regarding tariffs continues. Bharti’s tariffs are around 15-20% at a premium to Jio’s and it cannot afford to hike tariffs till Jio does. Looking at subscriber addition trends for the last three months where Bharti has been adding more users than Jio, it is unlikely that Jio will raise tariffs at this point of time.

Bharti added 3.7 million subscribers on net basis in October (the last month for which Trai data is available), thus leading for the third straight month and maintaining its monthly pace of additions at 3-4 million over the past four months. Jio added 2.2 million subscribers for the month, marginally better than 1.5 million in September but was well below its pre-Covid run-rate. Jio’s VLR (active) subscribers trend shows further weakness with net gains of just 1.1 million adding up to a base of 319.4 million, which is now marginally lower than Bharti, which added 3 million to its VLR base.

If one sees Vodafone Idea, it lost 2.7 million subscribers during October, a tad lower than reduction of 4.7 million subscribers in the month prior to it.

In the 4G segment, Bharti continued to keep its pace adding 4.2 million subscribers in October, much better than Jio’s 2.2 million, whereas Vodafone Idea fared poorly here adding 0.6 million.

On a 12-month basis Jio’s VLR subscriber market share increased by 2.2 ppts y-o-y to 33.2% in October, while Bharti saw a marginally smaller uptick of 1.7 ppts on the same metric during the given period. Vodafone Idea saw a steady erosion of its subscriber base throughout the year with its total and VLR subscriber share declining to 25% and 27% respectively.

Industry executives have said that with Jio in race for subscriber addition with Bharti and as Jio also likely to come out with a new variant of its 4G-feature phone, JioPhone as well as its low-cost smartphone in partnership with Google, it is unlikely to go for a tariff hike in near term which means that status quo would prevail.