Mobile data to become expensive as Indian telecom companies to hike tariffs

WION Web Team New Delhi, Delhi, India Nov 19, 2019, 04.19 PM(IST)

File photo. Photograph:( Reuters )

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The announcement came after Vodafone Idea and Bharti Airtel declared losses of about 10 billion dollars in their second quarter.

In October this year, a World Economic Forum report highlighted that the average data cost in India is lower than any other country in the world. However, this might not be the scenario from next month.

Two of the country's biggest telecom players have announced that they will be increasing their mobile data rates from December 1.

The announcement came after Vodafone Idea and Bharti Airtel declared losses of about 10 billion dollars in their second quarter.

The companies haven't declared the quantum of the hikes yet.

This is the first time that these companies are increasing their data prices in more than three years. But, why are the companies doing so?

Three years ago, Reliance Jio's entry into the telecom market led to a disruption in the sector after they offered drastically reduced data prices which subsequently led to a price war among the telecom companies.

Recently, Jio started charging 6-paise a minute for calls made to a rival’s network in order to improve its operating performance.

Another reason for the recent data hike is, the Indian government and telecom operators were locked in a legal tussle over the definition of adjusted gross revenue.

In October, the Supreme Court ruled in the government's favour asked companies to pay Rs 92,000 cr to government.

This is a monumental sum; and, to pay this kind of money, Airtel and Vodafone Idea, had to set aside a huge sum. Meaning, their liabilities now run into thousands of crores.

According to a report, Bharti Airtel may face liabilities of a whopping Rs 62187 crores and Vodafone Idea may have to pay about Rs 54184 crores.

Both companies have said that they have no choice but to hike prices if customers want to continue to enjoy world-class digital experiences.

Meanwhile, soon after the announcement of tariff hikes, shares of Bharti Airtel Ltd and Vodafone Idea Ltd surged resulting in Vodafone recording best one-day gain ever.

Airtel's shares closed up 7.37%, their highest since January last year, while Vodafone's stock ended 35.96% higher and recorded its best one-day gain ever during the day's trade.