New Delhi, January 20
The Indian telecom sector is gearing up for another round of tariff hikes, likely to exceed 15 per cent, by late 2025, says a report by IIFL Capital.
The report also highlighted that however, entry-level plans may remain insulated from these increases, reflecting a strategic focus on affordability for low-income users.
The report believe this move is crucial for the industry's financial stability, particularly for Vodafone Idea (Vi), which continues to struggle to position itself as a viable third player in the market.
It said "that there is likely to be another round of 15 per cent+ tariff hikes in late 2025. However, we will not be surprised if entry level plans see no tariff hikes"
The report stated that the recent developments highlight the challenges faced by the industry in balancing revenue growth and customer retention. The tariff hikes implemented in July 2024 led to notable SIM consolidation and down-trading, with Jio and Vi experiencing lower-than-expected revenue gains.
Additionally, weak consumption spending across other economic sectors has dampened consumer spending power, further impacting the industry's revenue potential.
Adding to this dynamic is the regulatory stance of the Telecom Regulatory Authority of India (TRAI), which recently mandated the introduction of voice-and-SMS-only packs without bundled data.
This directive aims to ensure affordability for customers who do not require data services, highlighting TRAI's concerns about unchecked tariff increases, particularly for entry-level users.
Despite these challenges, the report maintained that tariff hikes remain inevitable, driven by the need to ensure Vi's financial health and sustain its competitiveness. The relief measures introduced to support Vi only partially address its financial challenges, leaving a significant revenue gap to be filled through higher tariffs.
The report said "In our view, we do not see any risk to future tariff hikes since the relief measures only partly address the challenge of making Vi a competitive third player".
It predicts that while mid- to high-tier plans may see notable price increases, entry-level plans could remain unaffected to avoid alienating budget-conscious users and triggering further SIM consolidation.
As the industry moves toward these expected changes, the focus will be on striking a balance between achieving financial sustainability and maintaining consumer affordability, ensuring the long-term viability of the sector.
- ANI