Tariff increase effect: 7.5 m mobile users disconnect in May

The increase in mobile tariffs forced 7.5 million active mobile subscribers to drop out in May. This is the first time that the active subscriber base has decreased in the last 10 months.

Although the overall subscriber base has declined in the last few months, most of the outages were from users with multiple SIM cards or low-end users, who were largely categorized as inactive subscribers. On the other hand, active subscribers are those who recharge their connections at least once every 90 days.

The non-cash operators Vodafone Idea, Reliance Jio and Bharti Airtel increased their tariffs by 20-25 percent in their mobile plans at the end of November 2021. Analysts predict that there may be more interruptions, even when telecom operators are preparing for a new round of tariff increases in an attempt to recoup their investment.

Mobile, lifebelt

For Indians in economic margins, a 15-20% tariff increase could mean they have to give up their mobile subscriptions. This may have wider implications, as many social assistance schemes in India depend on mobile connectivity. For example, in the framework of the Jan Dhan Aadhaar mobile initiative, the government directly transfers subsidies to its beneficiaries. This includes access to life insurance, accident insurance, pension schemes and LPG for the poorest of the poor. Beneficiaries of Pradhan Mantri Garib Kalyan Anna Yojana must also have their ration cards associated with mobile numbers.

Technology researcher Srinivas Kodali said: “While the government has opportunities for the poor to have potential access to these schemes without mobile numbers, it is becoming very difficult for the poor to navigate a digital country without a phone. Poor people will have to spend more money on access to these services than ordinary service providers. Codali notes that internet access significantly increases the opportunities for profit and access to social mobility for the poor.

Increase revenue

However, telecom operators are not worried about losing subscribers, as they are shifting their focus to increase revenue. With 5G around the corner, telecommunications is aiming for a significant increase in capital costs, which would make it necessary to increase mobile tariffs. Peeyush Vaish, a partner and leader in the telecommunications sector at Deloitte, said: “Operators will need to increase their tariffs by 15-20 percent next year or so in order to be financially sustainable. More importantly, operators will have to get rid of their lowest subscribers in order to increase their average revenue per user (ARPU).

Ravinder Takkar, CEO of Vodafone Idea, said in his earnings call for Q4FY22 that the industry needs to increase its ARPU to at least 200 rupees and another increase in mobile tariffs is needed this year. “Mobile tariffs make up a small part of the consumer portfolio, so two more tranches of price increases may be possible,” Takcar said.

Posted on

June 17, 2022

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