India’s billion-plus mobile users will now have to spend about 40% more than before to continue using their mobile services. It comes as all three-leading private telcos Reliance Jio, Bharti Airtel and Vodafone-Idea have all increased tariffs for the first time since 2016.

How much is the increase?

Vodafone-Idea and Airtel with over 31 crores and 28 crore users respectively have so far increased rates only for their pre-paid subscribers from Dec. 3.

Both telcos are putting a cap on the daily unlimited calling plans by implementing a fair usage policy (FUP).  After a limit, customers will be charged 6 paise per minute for a call to other networks.

While Airtel’s tariff hike would range from 50 paise a day to Rs. 2.85 per day, the market leader Jio which has over 35 crore users, will hike its rates by up to 40% from Dec. 6.

What was the need of raising tarrifs?

This tariff rise, besides leading to major revenue gains would also help in attracting investments in Airtel and Vodafone-Idea.

Both companies are in desperate need of funds to pay over Rs 35,000 crores and Rs 53,000 crores respectively, in pending dues as per adjusted gross revenue (AGR), under a Supreme Court ruling.

A prolonged price war in the Indian telecom sector since 2016 has drastically cut revenues and has hit the older telcos extremely hard.

The industry presently has the world’s lowest average revenue per user (ARPU) and is burdened with over Rs 7 lakh crores of debt.

Relevant for GS Prelims & Mains Paper III; Economics