Trai's order paves the way for tariff hike by telecom operators

The Telecom Regulatory Authority of India (Trai) has directed telecom operators against discriminating between subscribers of the same class in tariff offers. In an order, that would make it difficult for telcos to offer highly discounted segmented tariffs, the regulator has also made it clear that differential pricing for subscribers porting out from a rival firm would not be allowed.  

The move is expected to be the first step towards an across-the-board tariff hike in the industry, according to analysts. But sources say that the issue of discounted segmented tariffs being offered to their own customers can still continue. 

Despite a government nudge to the industry to voluntarily hike tariffs, at least one operator had opposed such a move arguing that a similar move in December 2019 when they agreed together to hike tariffs by 30-40 per cent did not work because competing telcos started giving discounted segmented tariffs to retain customers. For instance, they pointed out that in order to encourage porting, rivals were offering discounted tariff to such users for nearly three months. They also complained that these tariffs were not even declared to Trai as required by the regulations.

The operator, which had protested against differential pricing, had said it was ready to go with the industry if the regulator or the government came out with an institutional mechanism to check such arbitrary schemes. However, the current Trai order might not be enough for them to take the plunge.  

Even so, the Trai order is significant as it comes in the backdrop of incumbent operators Bharti Airtel and Vodafone Idea pushing for an across-the-board increase in tariffs. In an analyst call recently, Bharti Airtel chairman Sunil Mittal said he was losing patience and that a tariff hike was the key to survival. He pointed out that average revenue per user per month (ARPUs) must cross Rs 200 by the end of this financial year and then to Rs 300 for the industry to thrive. Bharti Airtel’s ARPU is around Rs 146 currently. A similar call also came from VIL, which has said that any chance of the company raising Rs 25,000 crore from new investors hinges on the industry increasing tariffs.

The two players have also been pushing for a minimum floor price but the regulator has ruled out such a move. The reason, say analysts, is that the two of the three companies have been making profits and are therefore not selling below the cost price.

Telecom tariff has been under forbearance. 

In 2018 also, the Centre had suggested to telcos to review tariffs as low rates were destructive for the industry and were affecting the government’s revenue collections. Telecom firms are in a revenue-sharing arrangement with the government. Estimates suggest that at least 35 per cent of their revenues go towards various levies to the government.

Telcos had arrived at a consensus to raise tariff by around 20 per cent in December 2019. That was not enough to get financially-stressed firms like Vodafone Idea out of the woods, analysts pointed out.

Recently, telcos have taken baby steps to increase tariffs. In the last few weeks, Bharti Airtel and Vodafone Idea increased tariffs in certain limited segments.

Telcos offering segmented tariff offerings has been a bone of contention for a while. In 2018, Trai  had sent notices to Bharti Airtel and Vodafone Idea, pulling them up for failing to comply with the tariff reporting norms (where a new tariff plan has to be communicated to the regulator). It had threatened to impose a fine too. Subsequently, Airtel appealed and was able to get an interim relief from the telecom tribunal TDSAT.

In November 2020, the Supreme Court, where the regulator went in appeal, made it clear that Trai  can ask for details on segmented tariffs for record. But it would be Trai’s duty to keep the information confidential, the top court had said.