Telcos hike data tariffs: Analysts expect price-sensitive subscribers to bear the burden

Private telcos in India have recently increased entry-level data plans, signaling a broader tariff hike. Analysts expect a tariff hike in the current financial year, which may weigh on price-sensitive mobile subscribers in tier-2 and beyond markets. Brokerages project that this move will boost average revenue per user (ARPU) for telcos, with Jio's ARPU expected to increase by ₹11-13, Airtel's by ₹10-11, and Vi's by ₹13-14. The hike may affect affordability for rural and semi-urban markets but have minimal impact on urban and high-usage customers.

Vodafone Idea (Vi) shares slumped by over 10.5% on Tuesday following reports that the Indian government is unlikely to provide a fresh bailout for the cash-strapped telecom operator. The news was confirmed by Minister of State for Communications Chandra S. Pemmasani, who stated that the Centre is not considering an additional relief package for Vi [1].

The Indian government currently holds a 49% stake in Vi after converting nearly ₹53,000 crore of the company's dues into equity in 2021. Pemmasani ruled out any further equity conversion, noting that such a move would make Vi a public sector undertaking, which the government is not considering [1].

Vi continues to grapple with heavy liabilities, including AGR dues of over ₹83,000 crore and overall obligations to the government exceeding ₹2 lakh crore. With the moratorium on payments set to end in March 2026, Vi will need to resume annual payments of approximately ₹18,000 crore [1].

The company's woes have been exacerbated by a Supreme Court decision rejecting its plea to waive ₹45,000 crore in interest and penalties on AGR dues. The four-year moratorium on AGR payouts is set to end in September, leaving Vi in a tight financial squeeze [1].

In response to its financial challenges, Vi has initiated early-stage talks with private credit funds, including Davidson Kempner, Oaktree, and Värde Partners, to raise a small tranche of debt. The company could run out of funds to sustain its capital expenditure program by the fourth quarter of the current financial year if it is unable to secure additional capital [1].

Meanwhile, private telcos in India have recently increased entry-level data plans, signaling a broader tariff hike. Analysts expect a tariff hike in the current financial year, which may weigh on price-sensitive mobile subscribers in tier-2 and beyond markets. Brokerages project that this move will boost average revenue per user (ARPU) for telcos, with Jio's ARPU expected to increase by ₹11-13, Airtel's by ₹10-11, and Vi's by ₹13-14. The hike may affect affordability for rural and semi-urban markets but have minimal impact on urban and high-usage customers [2].

References:
[1] https://stocktwits.com/news-articles/markets/equity/vodafone-idea-shares-slide-after-indian-government-reportedly-rules-out-fresh-bailout/chsHnnTRdSv
[2] Provided Writing Topic