Bharti Airtel, Reliance Jio and Vodafone Idea: From Tariff hike to trends, all you need to know

One key trend witnessed in 2020 was faster adoption of home broadband services. In the last six months to October, nearly four lk users were added every month. This was owing to two factors – Covid and cheaper plans. This will continue to result in faster adoption of broadband in India even in 2021. The outbreak of Covid-19 induced the culture of working and studying from home. Along with this in September, new broadband plans introduced by operators aided the growth. Operators not only introduced lower-end plans, but also started giving unlimited data.

Telecom companies took tariff hikes of 25-40% in the prepaid segment in December 2019. Another round of hikes was expected in the last calendar year but has been pushed to 2021 due to Covid shock: Reuters

Tariff hike will be the single most important factor which will drive growth for all the telecom operators in 2021. Telecom companies took tariff hikes of 25-40% in the prepaid segment in December 2019. Another round of hikes was expected in the last calendar year but has been pushed to 2021 due to Covid shock, pending clarity on floor prices, and Vodafone Idea’s new branding and ongoing network integration.

Recently, the number of 4G users in India has seen a sudden surge especially for Bharti Airtel. This trend is expected to continue as the company has been expanding its 4G network deeper into the market. JioPhone sales have been aiding Jio’s subscriber additions. This could further accelerate with the launch of new subsidised low-end smartphones. Vodafone Idea’s 4G net additions have been subdued due to poor network infrastructure

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One key trend witnessed in 2020 was faster adoption of home broadband services. In the last six months to October, nearly four lk users were added every month. This was owing to two factors – Covid and cheaper plans. This will continue to result in faster adoption of broadband in India even in 2021. The outbreak of Covid-19 induced the culture of working and studying from home. Along with this in September, new broadband plans introduced by operators aided the growth. Operators not only introduced lower-end plans, but also started giving unlimited data.

Fixed broadband which was earlier considered as an alternate entertainment medium has now turned into a utility like electricity, gas, and water.As broadband segment is highly underpenetrated, telecom operators are expanding its presence and looking to penetrate deeper through a partnership with cable operators for last-mile connectivity.

Big Events & Key Challenges for Telecom Companies:

Two of the key events pose a threat for the telecom companies in 2021. Firstly, the AGR case, there is a dispute between telecom companies and the Department of Telecommunications that is being contested in the Supreme Court of India on One Time Spectrum Charge (OTSC).

As background, OTSC dues are based on DoT rules that require a telco, holding spectrum beyond 6.2 MHz/circle between July 2008 and December 31, 2012 and beyond 4.4 MHz/circle between January 2013 till the expiry of their respective licences, to pay a one-time market-linked price for the excess spectrum held. While both Airtel and Vodafone Idea have made some provisions for the same in their books of accounts, any adverse ruling on this front will create an additional outflow.

Bharti Airtel and Vodafone Idea has so far provisioned for Rs 5600 cr and Rs 3890 cr, while the combined estimated liability according to media reports is likely to be around Rs 25000 cr.
In the first quarter of 2021, the Indian Government is looking to conduct a spectrum auction. Deployment of 5G is still a few years away, based on the development of an affordable ecosystem as well as visibility of the revenue stream.

One of the important events to watch out for in 2021 would be fund raising in Vodafone Idea. Vodafone Idea's financial position continues to remain relatively weak and it needs significant fund infusion to keep operations going. The company has approved a fund-raising plan involving a mix of debt and equity totalling a maximum of Rs 25000 cr.

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