Telco’s increases tariffs for 4G services in the second half to ensure 5G adoption

By Our Special Correspondent

It has asked telecom operators to hike tariffs for 4G services in the second half of the current financial year to ensure mass adoption of 5G services.

According to industry insiders, a massive 5G rollout can happen only in the next financial year as liberalization (a prerequisite for effective 5G deployment) is now weak and Telco’s need to launch commercial services in at least one city in each circle. As per the rollout obligations, the first year of license.

Thus, the full benefit of tariff hike and 5G launch will be realized in FY 2024. “Given the significant investments in spectrum acquisition, we believe Telco’s will charge differential prices for 5G services. In fact, adoption of 5G services will depend on the extent of premium over 4G tariffs,” said Manish Gupta, Senior Director, CRISIL Ratings.

“In an effort to drive mass adoption of 5G, Telco’s may increase tariffs for 4G services, though two rounds of tariff hikes will be affected in December 2019 and November 2021 respectively. We expect another tariff increase on 4G services in the second half.

A research report by Emkay Global Financial said Adani's potential entry into the spectrum-related payment and business-to-consumer (B2C) space is now on the back burner and believes the focus will shift to the quantum and timeline of the tariff hike.

"In addition to spectrum usage charge (SUC) savings of Rs 8 billion and Rs 20 billion in FY24 and FY25, respectively, we have raised tariff by 15% in our assumption, which we expect to fully reflect the savings after fresh spectrum is put into use," the report reads.

The Department of Telecommunication (DoT) has launched the first ever 5G spectrum auction for Rs. 1, earned 50,173 crores, 71% of the total spectrum sold.

Cash-rich Reliance Jio spent Rs.88, 078 crores to buy spectrum, Bharti Airtel Rs.43, 084 crores and Vodafone Idea Rs.18, 799 crores to buy spectrum. However, experts are of the opinion that the additional spectrum purchased in this auction may increase the sector's debt to Rs 6.1 lakh crore.