Recently after raising charges in its existing plans to 10-40%, Bharti Airtel and Vodafone Idea may increase data and user rates once again.
First published in CNBC-TV18, that Vodafone Idea and Bharti Airtel might start minimal price hikes from 2 to 5% and based on the response from the customer planning to increase more in the coming months
A senior Executive from Vodafone Idea has also confirmed that they are looking to hike prices in a phased manner with minimal percentages so that the users won't feel any drastic price increase and are planning to increase up to 25% in December.
After the Supreme Court verdict on the staggered payment of Adjusted Gross Revenue (AGR) dues, most of the telcos have hiked their prices from 10 to 40 percent in some tariff plans last year which was effective from December 2019.
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sources from the industry have expressed that these price hikes are necessary for long term sustainable growth of the company and starting from September but the hikes would be passed onto customers only by October-December 2020 in an interview with CNBC-TV18, and wish to remain anonymous.
Many brokerage firms like SBI Caps, Axis Capital and Jefferies have expressed that a price hike in traffic is needed to consolidate the growth of both Airtel and Vodafone Idea. As the losses in Vodafone idea pile up the problems also increase for Vodafone Idea to hike traffic prices to this, Bharti will continue to benefit from every 2G to 4G migration, and Jio by adding more of high-quality smartphone users.
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But for any price to be effective, Jio will be the deciding factor while Vodafone Idea or Bharti Airtel may initiate the increase in tariffs but if Jio doesn't hike its prices there is a possibility that many of customers will migrate from Vodafone Idea or Bharti Airtel to Jio if prices are too high. Any tariff increase in the near term may help Jio in addressing investments in its 5G services and its digital products.
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According to Axis Capital said, "Vodafone Idea had Rs 514 billion balance AGR dues at end of Q1, after payment of Rs 68.5 billion, while it had only Rs 34.5 billion in cash (excluding margin deposits). It has further paid Rs 10 billion in AGR dues in Q2 of 2020 and with approximately Rs 504 billion balance still pending. Given that it already has net debt of Rs 1,155 billion, it may be a stretch to make substantial payment upfront or make a payment over the tenure of 10 years in a staggered way. This may require the introduction of floor pricing/ tariff hike and other relief measures from the government."
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