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Telcos may delay further price hikes under Covid-19 impact: Analysts

“If concerns around Covid-19 lead to material impact on consumers’ ability to spend (especially daily wage laborers), then we see risks of tariff hikes being pushed back and magnitude being lower,” brokerage firm BofA Global Research said in a report.

, ET Bureau|
Last Updated: Mar 28, 2020, 11.41 AM IST
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Telcos had suggested data prices ranging from Rs 15 per GB to Rs 35 per GB, which are almost 60% higher than the current rates.

New Delhi: Telcos may put off plans for a second round of tariff increases to the second half of 2020 at the earliest, with the Covid-19 crisis expected to hurt consumer spending power and a decision on floor pricing getting delayed, analysts said.

“If concerns around Covid-19 lead to material impact on consumers’ ability to spend (especially daily wage laborers), then we see risks of tariff hikes being pushed back and magnitude being lower,” brokerage firm BofA Global Research said in a report.

Reliance Jio Infocomm, Vodafone Idea and Bharti Airtel increased prices by up to 40% in December and a second round was widely expected in the April-June quarter. The Telecom Regulatory Authority of India was expected to bring in regulation to set floor prices for services in April.

“While tariffs are well below other markets and where they should be for operators to make a reasonable return on capital, considering the Covid-19 impact and the ongoing floor tariff consultation, operators may avoid tariff hike in the near term,” said Kunal Vora, a senior analyst at BNP Paribas India.

The regulator, at the behest of operators, had floated a consultation paper on the need to set a floor price for voice and data services.

Telcos had suggested data prices ranging from Rs 15 per GB to Rs 35 per GB, which are almost 60% higher than the current rates. According to a report by Deutsche Bank, the price of data for popular plans of Bharti Airtel and Vodafone Idea is Rs 4.7 per GB and for Reliance Jio, it is Rs 4.4 per GB.

Stakeholders have submitted their comments on the matter. An open house discussion on the subject has to be conducted before Trai passes its order and it may now take place only after the current national lockdown is scheduled on end on April 14.

Airtel and Vodafone Idea want a cost-based method to arrive at a floor price, whereas Jio has said it must be determined on headline tariffs.

Airtel has suggested a data price of Rs 22 per GB, while Vodafone Idea wants minimum tariffs for mobile data fixed at Rs 35 per GB. Jio said prices should be hiked gradually to Rs 15 per GB first and to Rs 20 per GB after six-eight months to avoid a large subscriber churn.
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“In our view, top two operators by revenue market share (Jio and Airtel) have relatively stronger balance sheets and can manage with existing tariffs in the near term,” said Vora of BNP Paribas.
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