Tariff hike in
the telecom sector is "inevitable" as the current structure does not
allow reasonable returns for operators, although a lot would depend on the
timing given the "unprecedented" scale of the Covid-19 pandemic and
resultant affordability crisis, according to EY.
Acknowledging that an immediate tariff increase
may not be feasible in the current setting, Prashant Singhal, emerging markets
Technology, Media & Entertainment and Telecommunications (TMT) Leader at EY
said two rounds of tariff hikes can be expected in the next 12-18 months,
including one in the next six months.
"Tariff hike is necessary. Telecom as spend for consumers is fairly low,
and tariff hikes should likely happen over next 6 months, I am not saying it
must, but sooner the better.
"One has to
keep in mind the economic situation and affordability factor... but over 12-18
months, you have to have two rounds of tariff hikes, including one in the next
six months, to ensure sustainability in the market," Singhal told PTI.
Whether such a hike comes through regulatory
intervention or industry action remains to be seen, but the financial health of
the operators necessitate a revision in tariffs, he said.
"Fundamentally, if the sector has to do
well, what you require is fair price for service which is being offered by companies.
"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 don't feel the pinch, that
is where the revival of the sector will happen," Singhal said.
The industry is talking of Average Revenue Per
User (ARPUs) going up anywhere from 60 per cent to 80 per cent over next
two-three years, and that can happen by way of tariff increase, and moving away
from fixed price plans to data based on usage or consumption.
Tariff hike is inevitable, and the issue is one
of timing, he asserted.
"If we did not have the pandemic, we may
have seen a hike in June itself. Now because of the pandemic, which is
unprecedented and extraordinary, we may see a tariff hike in next six months
but it is inevitable, as current structures don't allow companies to have
reasonable return on capital employed," Singhal added.
TelecomNews Bureau
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