For Indian mobile phone users, the days of rock-bottom tariffs are finally drawing to a close. On Monday Vodafone Idea and Bharti Airtel announced that they will raise charges from December onwards.
A day later Reliance Jio, which had disrupted the mobile phone services market by introducing predatory pricing, said it will follow suit in the next few weeks. The company said it will hike tariffs in such a manner that it will not adversely affect data consumption or overall growth.
Last month Reliance Jio introduced an interconnect usage charge for its users making calls to other networks. The move came after the telecom sector watchdog Telecom Regulatory Authority of India said it may reconsider its proposed plan to end such charges by January 2020.
Vodafone Idea and Bharti Airtel had announced higher rates for calls and data, amid ongoing financial troubles. At a time when they had their hands full dealing with the price war unleashed by Reliance Jio, the Supreme Court had dealt yet another blow to the two operators, increasing the scope of adjusted gross revenue to include non-core income while paying spectrum charges to the government.
The new rule hit the two operators hard as they have to pay huge sums as arrears in a span of three months, while Reliance Jio, which began services only in 2016, has to pay much less than its rivals.
While Bharti Airtel faces a liability of around 420 billion rupees ($5.92 billion) after including license fees and spectrum usage charges, Vodafone-Idea may have to pay about 400 billion rupees ($5.64 billion). Reliance Jio may have to pay a much smaller sum of 140 million rupees ($1.97 million).
In order to make such a huge provisioning, both the telecom networks posted huge losses in the July-September quarter. Vodafone Idea reported a loss of 509 billion rupees (US$7 billion) for the September quarter, the biggest in Indian corporate history. Bharti Airtel also posted its highest loss ever of 230.45 billion rupees ($3.2 billion) during the same quarter.
Vodafone Idea has now approached the income-tax department seeking about 70 billion rupees in tax refunds for past years even as it faces fresh statutory dues liability. The telecom company’s move has now put the taxmen in a bind.
The tax department has in past adjusted refunds against another company’s other liabilities towards the government. It famously adjusted 15 billion rupees in tax refunds due to Cairn Energy plc of UK to partly settle a retrospective tax demand.
On the other hand, Reliance Jio’s finances are in much finer fettle. The company posted a net profit of 9.9 billion rupees in the September quarter, up 45.4% year-on-year, as data consumption surged on the back of more subscribers onboarding the network. The company’s operating revenue rose 33.7% year-on-year to 123.54 billion rupees.
Reliance Jio adds users
In a separate development, the telecom regulator released the data on user base of the three telecom companies. While Reliance Jio added 6.98 million, Bharti Airtel and Vodafone Idea lost 2.3 million and 2.57 million users respectively.
As on September 30, 2019, Vodafone Idea had a subscriber market share of 31.73%, Reliance Jio had a market share of 30.26%, and Bharti Airtel of 27.74%. State-run MTNL saw 8,717 users move out (3.3 million user base), while BSNL added 737,000 users to take its total base to 117 million.
The wireless teledensity in India increased from 88.77 at the end of August to 88.90 at the end of September.
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