Decide on floor price for tariffs to ensure sustainability: Telcos to Trai

Topics COAI | TRAI  | Telecom industry

The industry is seeking an early conclusion on this important matter with great interest, COAI said.
Telecom players have urged regulator Trai to move forward quickly on the issue of fixing floor price for tariffs, saying the matter is imperative to ensure that the sector is sustainable and in a position to bear the deferred spectrum and AGR dues.

The Cellular Operators' Association of India (COAI) -- whose members include Bharti Airtel, Vodafone Idea and Reliance Jio -- has written to the Telecom Regulatory Authority of India (Trai) seeking an open house discussion on the issue "at the earliest".

"Given the financial pressure on the sector and the fact that ARPU (Average Revenue Per User) and tariffs of the Indian telecom sector are the lowest in the world, floor pricing is imperative to ensure that the sector is sustainable, and is in a position to bear the deferred spectrum and AGR (Adjusted Gross Revenue) dues, while continuing to invest in world-class networks and services," COAI said in its letter to Trai Chairman R S Sharma.

The association said the industry looks forward to an early decision by the authority on having floor tariffs for data services.
"While, we acknowledge that the recent situation on account of Covid-19 might have caused some constraints, however, the Authority has started conducting the OHD (open house discussion) through online process on various other topics. Accordingly, we request the Authority to kindly hold an OHD on this issue at the earliest," COAI said.

The industry is seeking an early conclusion on this important matter with great interest, COAI said.

The regulator had earlier this month resumed its customary open house discussions on pending matters through video-conference. However, Trai sources had made it clear that the issue of floor price of tariffs is unlikely to be taken up via online mode till the ongoing situation arising from the Covid-19 pandemic stabilises.
Given the coronavirus pandemic and the difficulties faced by people, Trai may wait for the situation to stabilise before it proceeds to the OHD stage on floor price issue, a source had said.

Recently, Bharti Airtel CEO, India and South Asia, Gopal Vittal in an earnings call drew attention to the pending floor price issue, saying while the telecom industry has seen some bit of repair, tariffs continue to be "unsustainably low". He exhorted the sector regulator to address the floor price issue "sooner than later".

"We believe that an ARPU of Rs 154 is inadequate to turn a reasonable return on capital as a company and remain hopeful that ARPUs will get to Rs 200 in the short term and eventually to Rs 300 which is where it should be for a business like ours.

"Of course, even at this level of ARPU we believe we will be very well placed to serve all the lower-end customers who may have the capacity to pay Rs 100 or less," Vittal had said.

Airtel said the full impact of the tariff hike undertaken in December 2019 came through in its entirety with no downtrading.

"While there will be some growth on ARPU on a secular basis because of upgradation from 2G to 4G, we have maintained that tariffs are still unsustainably low.

"The industry is very keen to have telecom regulator intervene in pulling together...floor prices...I think all responses have gone to Trai and right now they have not taken a decision given circumstances around Covid-19. But I do believe that this needs to be corrected sooner rather than later," Vittal had said.

For Bharti Airtel, the ARPU or earning per subscriber -- a key metric for telecom companies -- stood at Rs 154 in March quarter against Rs 123 in the year-ago period, and Rs 135 in December quarter.

For Jio, APRU was sequentially higher at Rs 130.6 per month, and the company had said that further impact of December 2019 tariff hike will flow through in the coming months.

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