According to EY, tariff hike in the telecom sector is inevitable as the current structure does not allow reasonable returns for operators. However, a lot would depend on the timing given the unprecedented scale of the Covid-19 pandemic and resultant affordability crisis, EY said.

Acknowledging that an immediate tariff increase may not be feasible in the current setting, Prashant Singhal, Emerging Markets Technology, Media and Entertainment and Telecommunications (TMT) Leader, EY stated that two rounds of tariff hikes can be expected in the next 12-18 months, including one in the next six months to ensure sustainability in the market.

However, Singhal stated that it remains to be seen whether such a hike comes through regulatory intervention or industry action.

Fundamentally, if the sector has to do well, what you require is fair price for service which is being offered by companies, EY said. There has been one revision of tariffs in December, and if one or two rounds of upward revision happen to make it at least at par with other emerging markets, in a way that consumers do not feel the pinch, that is where the revival of the sector will happen, added EY.