Telecom organizations like Airtel, Jio, and others are expected to heading for a possible tariff hike.
Credit rating agency ICRA stated that the hike in tariff is on the cards as telecom operators in India are expected to make sizable payouts to the government.
ICRA maintains that a sustainable and sizeable average revenue per user (ARPU) expansion is significant from the view of the telecom operators to reach their payout commitments.
The Supreme Court has given 10 years to some telecom operators to free their AGR dues. The telecom operators are also asked to pay auction installments and daily revenue share to the government.
It is not cleared, however, if the next round of tariff hikes will be implemented to the telecom operators who face AGR dues or if all operators will implement it.
“While the industry yet closes with elevated debt levels and low debt coverage metrics, the last fiscal has observed some respite in terms of steady ARPU improvement driven mainly by the tariff hikes implemented in December 2019, the telcos undertake the deleveraging measures, and moderation of CAPEX intensity,” Anupama Arora, vice president and sector head of Corporate Ratings at ICRA, told in a statement.
ICRA besides remarked that the postpaid segment has appeared as the battlefront about Jio bringing in its new postpaid Plus plans in the market and Airtel increasing its basic Rs 399 plan.
The firm noted that postpaid plans bring more maximum user stickiness as well as higher ARPU.
“It continues to be seen how this will affect competition as typically India is essentially a prepaid market while internationally, many countries are ruled by postpaid connection,” ICRA noted.
According to the firm, the tariff hikes and regular upgrades of 2G subscribers to 4G have developed the ARPUs in the past.