Telecom industry needs tariff hikes at regular intervals:

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India’s third largest telecom provider Vodafone Idea said the industry needs to increase mobile tariffs at regular intervals as the sector still functions at unsustainably low prices and corrections will help it to generate reasonable returns and keep up future investments.

VIL recently said that another tariff hike is possible before the end of 2022 as it looks for a margin boost to improve its liquidity. The struggling telecom operator said per user revenue remains lower than historic trends.

All three private telecom operators including Reliance Jio, Bharti Airtel and VIL have hiked charges for data, arresting average revenue per user (ARPU) declines.

Despite this, “the industry still operates on unsustainably low tariffs”, VIL said in its latest annual report.

The report added, “India continues to have the lowest tariffs globally, while the proliferation of unlimited data bundles has led to India having one of the highest data usages (per subscriber) in the world.” The ARPU levels remain lower in comparison to historic trends, despite consumers getting much more value in terms of unlimited voice and daily data allowances, compared to five years ago.

“The company thus believes that the industry will have to further raise tariffs at regular intervals, which is essential for operators to generate reasonable returns on their capital employed and support future investments, including new technologies,” the firm said.

The joint venture of Aditya Birla Group and Vodafone Group had in 2021 got a fresh lifeline after the government extended a relief package to the sector. Vodafone Idea had 24.38 crore subscribers as of 31 March, 2022, of which 11.81 crore were 4G users.

The debt-ridden telecom firm said while the Supreme Court allowed past statutory dues to be paid in 10 years, the government announced a relief package for the industry in September last year to address liquidity challenges facing the telecom sector. Vodafone Idea had 24.38 crore subscribers as of 31 March, 2022, of which 11.81 crore were 4G users.

The debt-ridden telecom firm said while the Supreme Court allowed past statutory dues to be paid in 10 years, the government announced a relief package for the industry in September last year to address liquidity challenges facing the telecom sector.

After this, “the Company has started to witness improvement in various operating KPIs including leading the league tables of Voice and Data experiences it offers to the customers. The pace of subscriber base decline has also reduced to some extent,” it said. At present, the firm is in discussion with lenders and investors to get the requisite equity and/or debt funding which will enable it to restart the capex cycle and move towards the growth journey in line with its long-term strategic intent.

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