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India's top mobile network providers have been significantly impacted by the recent spike in telecom rates; in August, Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi) saw large subscriber losses. According to data from the Telecom Regulatory Authority of India (TRAI), these private telecom behemoths have seen a continuous drop in consumers since July, when pricing for a variety of plans increased by 11-25%. Unexpectedly, the only operator to report an increase in subscribers was Bharat Sanchar Nigam Limited (BSNL), a state-run company that maintained pricing stability.
In August, Vodafone Idea lost 1.8 million customers, Bharti Airtel lost 2.4 million, and Reliance Jio lost 4.01 million. This follows an 11-25% hike in tariff rates by the three carriers in July.
The Reason Telecom Companies Increased Tariffs
Rate hikes became financially necessary as private telecom providers worked to develop 5G infrastructure. However, the spike has caused widespread dissatisfaction and a wave of consumer movement to BSNL, which has had a significant impact on customers. In order to alleviate the financial strain on the industry and increase consumer affordability, the Cellular Operators Association of India (COAI) has pushed for lower licence rates.
Reliance Jio, Bharti Airtel, and Vodafone Idea are among the private telecom companies that have revealed new prepaid and postpaid pricing in the first week of July 2024. In order for the sector to expand services and make investments in 5G services, telecom providers have been adamantly arguing for price increases. Many customers switched to the public telecom company Bharat Sanchar Nigam Limited (BSNL) as a result of this rate increase. Nevertheless, looking at the user churn, private telecom providers might think about rolling back the recent pricing increases, depending on future government choices.
Depending on the government's upcoming decisions on the sector, the private telecom industry may reevaluate the recent pricing increases. The government has also been encouraged to reduce the license fees that telecom operators must pay, by the Cellular Operators body of India (COAI), a trade body that represents telecom companies.
COAI Advocates for Lower License Fees
The government currently levies the licence fee at 8% which means, 8% of the adjusted gross revenue (AGR) produced by telecom carriers is used by the government to levy the licensing fee. A revamped licence fee structure, which would lower the charge to between 0.5% and 1% of total revenue, is what the COAI is promoting. A reduced licence cost, according to the COAI, will facilitate the ordinary man's life and hasten digital inclusion, especially in rural areas. The exorbitant fees no longer serve the original spectrum-based purpose, according to SP Kochar, Director General of COAI, who urged for modifications to reflect solely necessary administrative costs.
Additionally, telecom operators claim that the business may benefit greatly if the government and the telecom regulator agree to this proposal. Several officials at the recent India Mobile Congress expressed that their ability to invest in technological advancements is severely limited by current financial constraints, such as the need to pay Adjusted Gross Revenue (AGR), Corporate Social Responsibility (CSR) contributions, Goods and Services Tax (GST), and corporate taxes. Telecom companies are therefore at a comparative disadvantage in comparison to other industries as a result of these financial demands.
India's telecom market has changed as a result of the rate change, which may pave the way for additional government action to strike a balance between consumer affordability and telecom expansion.