As the sector steps into the new financial year, it is hoping for some stabilisation and pricing discipline to return. A recent report by Edelweiss suggests that telcos may finally be able to raise prices in the second half of financial year 2019-20, as mobile broadband penetration crosses 50 per cent.
In fact, booming data uptake has been the only silver lining for the industry during its period of financial turmoil, which has been marked by a spate of telco exits and consolidation. India today is the world’s largest data-consuming country. And data demand will continue to grow in the future with the launch of new technologies like 5G and internet of things, as more users get connected. It is, thus, imperative that telcos leverage this data opportunity and improve their revenue prospects.
Higher mobile broadband penetration will also ensure that telcos become less aggressive in acquiring market share and focus more on monetising their existing user base. For Jio too, price hikes will become crucial in order to improve its return on investments, as the operator has now achieved adequate subscriber coverage (it crossed the 300 million subscriber mark in March 2019).
Meanwhile, CRISIL also believes that telecom tariffs have bottomed out. Since the top three telcos now have almost equal revenue market share, they may just avoid price-led aggression as this would adversely impact them equally.
CRISIL, moreover, states that the higher data usage and introduction of minimum recharge plans will lead to a growth in ARPUs. The Edelweiss report too suggests that industry ARPUs will return to the pre-Jio level of Rs 156 by the end of 2021-22 (from Rs 98 in the third quarter of 2018-19).
India’s telecom narrative has changed drastically and dramatically over the past few years. Jio’s disruptive entry in September 2016 unleashed a bruising price war that has taken a toll on the industry in more ways than one. The anticipated price recovery should finally infuse some prudence and confidence in the industry, paving the way for financial stability.