Recently the telecom industry was in crisis and requested the government and the Trai for help. But they have taken matters into their hands by raising the tariff.
When Airtel announced its hike of 25% in their retail prices, all three private mobile operators in India raised their rates. That was an imminent issue. Airtel and Vodafone Idea constantly pointed out the present rates are unsustainable.
As of now the debt in the telecom sector is ₹3.85tn. That is more than their annual income. It also leads to the fear that it would adversely affect the bids in the coming 5G spectrum auction.
The company that is happiest about Airtel’s new move is Vodafone Idea. As of now, they face a combined liability of ₹1.8tn. They are facing lower ARPU among the three, and a dropping market share.
If they raised their tariff unilaterally, they could lose their users to other competitors in the market.
It could be avoided if Jio did not raise their prices. They were financially well placed, enough to go on with lower prices for long. If they have shown resistance, the competitors would have tried to match it.
Consumers will resent these changes. It will affect affordability. But the companies, still hope that this would not affect their subscriptions.
It is made on the idea that, with smartphones being cheaply available, the extra price burden can be absorbed in the usage of the internet.
But 400mn Indians use 2G, which is price sensitive. It is also a significant revenue source for the companies.
Some reports even state that the spectrum will be in use well into 2030. These subscribers will also be disadvantaged if the users do not get any benefit from their services.
The government, instead of intervening, might be happy with it. For a long time, they were facing pressure to ease the burden over the private companies, which is more evident in the case of Vodafone Idea.
The government will face two major risks if they intervene.
The first risk is the Vodafone Idea’s exit, which would hurt the investor confidence, which is already shaken by the Jet Airways incident. Their exit would also reduce the competition in the market.
Secondly, it would create the perception that the government has only concerns for the private companies instead of helping struggling government companies like BSNL. The government package reflects these risks.
At the same time, some people argue for price floors to be set by the Trai. As of now, Trai has not placed any restrictions on pricing authority. This is the reason why India has the lowest telecom bill in the world, even after this hike.
Trai has the authority to intervene when there is anti-consumer behaviour. But regulating is difficult in such a field, where there is a constant change in technology, especially when it comes to prices.
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