Time for telcos to reap returns on investments by levy rationalisation and tariff hike, says EY

New Delhi: Reduction in levies and tariff hikes are required for telecom operators in the country to reap the benefit of investments they have made in digital infrastructure, according to experts in the sector.

Private operators have invested around Rs 70,000 crore in telecom infrastructure and radiowave assets this year to expand the coverage of next-generation 5G services in 2024 for the sector. However, the challenge is to keep 180 million 2G customers connected and encourage them to move to 4G for inclusive growth.

“Telecom sector levies need to be rationalised, India is the highest on levies and still one of the lowest on tariffs. Innovation in tariff structure may come in with high usage customers paying more and entry level data users still at similar rates,” EY India Markets and Telecom leader Prashant Singhal said.

He said that India still had over 18 crore 2G customers who need to move to the 4G bandwagon in 2025 may see that happening.

“The investments made by telecom companies have been the backbone of the digital economy on which the entire start-up ecosystem has gained and it’s time for the sector to reap returns on investments by rationalisation of levies and increase in tariff,” Singhal said.

Bharti Airtel and Vodafone Idea have repeatedly emphasised the need for increasing average revenue per user (ARPU) to the level of Rs 300.

Post tariff hike in July, Vodafone Idea ARPU increased 7.8 per cent to Rs 166 on a quarter-over-quarter basis from Rs 154 in April-June. Bharti Airtel posted a 10.4 per cent increase in the July-September quarter to Rs 233 from Rs 211 in the first quarter of 2024-25 and Jio’s ARPU increased to Rs 195.1 from Rs 181.7.

The tariff hike by the private telecom operators in July, however, backfired. Around 2 crore subscribers dropped their connections. Reliance Jio, Bharti Airtel and Vodafone Idea jointly lost 2.6 crore customers due to a 10-26 per cent price hike.

Around 68 customers switched to state-run player BSNL which refrained from price hike. The loss-making PSU still offers generation-old 3G service and is on the path of rolling out 4G networks across the country.