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Even a 10% hike in tariffs may fetch telcos Rs 35,000 crore: DoT

DoT estimated that increase of 10% in realisations from subscribers may yield Rs 35k cr in revenue for telcos.

Updated: Nov 09, 2019, 08.56 PM IST
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The government has signalled that Trai could look at setting a floor for prices among various measures to restore the health of the sector.
NEW DELHI: The Department of Telecommunications (DoT) has estimated that an increase of 10% in realisations from subscribers — by raising phone bills — may yield about Rs 35,000 crore in revenue for the sector over three years without affecting consumer demand while helping companies regain financial viability.

Officials said DoT will provide the calculations that helped it arrive at the figure to the telecom regulator, which has final say on the matter, including whether to set a floor for pricing. The computation is based on average revenue per user (ARPU), which now hovers at Rs 120-130.

“If we increase this by even 10%, that is (about) Rs 11, then it comes to Rs 141,” said one of the officials. “The total impact will be Rs 11,000 crore per year and that is about Rs 33,000 crore in three years, presuming the demand remains constant, so industry can gain this much if they increase the price by Rs 10 per GB.” Assuming even a slight rise in data consumption, this would yield Rs 35,000 crore over three years at the minimum, he said.

The government is looking for ways in which the financial burden on the country’s telecom sector can be relieved after a Supreme Court ruling last month meant it would become heavier by about Rs 1.3 lakh crore or more. The committee of secretaries that’s tasked with finding ways of restoring the sector’s health is deliberating on measures such as lowering levies, ET has reported.

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According to a Telecom Regulatory Authority of India (Trai) report on wireless service data in India released in August, the price per GB of data plummeted to Rs 11.78 at the end of 2018 from Rs 226 in 2015. As per the DoT suggestion, though the data price will almost double, the effective impact on the subscriber is pegged at an average 10% increase in the bill.

“We found that in next-generation technologies, the line between voice and data is blurring and voice traffic is also shifting to data, so hiking the price for 1 GB of data by Rs 10 wouldn’t dampen demand but would help revive the profitability of the sector,” the official told ET. India’s data prices are among the lowest in the world.

The government has signalled that Trai could look at setting a floor for prices among various measures to restore the health of the sector. Despite the government’s nudges, the regulator doesn’t appear to be too keen on setting a floor price, ET reported November 6. The regulator is yet to get any formal communication from the government asking for this.

“What we are doing at our end is trying to argue and offer Trai different scenarios, permutation and combinations and different solutions. But it is finally up to them to take it up,” said the official cited earlier.

The sector, laden with over Rs 7 lakh crore of debt, was dealt a further blow by the Supreme Court judgment broadening the scope of adjusted gross revenue (AGR). That left telcos staring at over Rs 1.3 lakh crore in statutory dues, including penalties and licences, to be paid in three months.

The industry has also backed a rise in tariffs as an immediate measure that would help put it back on track. Vodafone Idea chairman Kumar Mangalam Birla and Bharti Airtel chairman Sunil Mittal have stressed the need to raise prices in recent meetings with officials to restore profitability.
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