Why mobile users may not shift to 5G soon…

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Why mobile users may not shift to 5G soon…

| Updated: January 16, 2024 09:34

Telecom operators will likely be harsh on the wallets of mobile phone users in India this year. Reports have emerged about tariff hikes that should rise to 20% in the year’s second half. Telecom operators will concentrate on revenue generation through price hikes this year, but analysts have claimed this will only happen after the general elections.

In addition, the deployment of 5G services will conclude this year, accelerating uptake, and 5G-specific pricing will probably be introduced.

Global brokerage firm CLSA has said that “2024 will be the year of tariff hikes,” which will help the country’s mobile sector revenue grow in 2024 as well, following a 10% growth in 2023.

BofA Securities, a financial services firm, has released a statement saying that the extent of the tariff hike will surprise consumers.

“After more than two years, we expect a 20% plus tariff hike in the calendar year 2024. This is likely after general elections and would be needed to help improve the health of the industry, especially Vodafone Idea Limited,” a part of the statement published by The Wire read.

“As 5G network fill-factor increases, telcos could eventually monetise by introducing daily data allowances on 5G plans,” IIFL Securities mentioned.

“One of the consequences of the above is that subscribers who are shocked by their initial data consumption surge on 5G, may manually change data usage settings on their phones to 4G. This will keep data usage from surging and preserve battery life. It will also prevent more users from adopting 5G, especially in the absence of compelling use cases for 5G to date.”

Meanwhile, Reliance JIO and Bharti Airtel have introduced plans for unlimited 5G data for customers whose base 4G pack costs Rs 239, or more, to enable users get accustomed to 5G speeds, without worrying about data limits.

“We thus see a sharp increase in per-capita data usage from 5G. A mix of organic data usage growth, higher feed density on 5G and higher time spent online could result in data usage per sub per month jumping to 50GB over time. We expect Reliance Jio and Bharti Airtel to monetise 5G by introducing daily data allowance,” the IIFL Securities note added.

Further, it said the 5G daily allowance could be 12-18 months away.

“Jio’s potential listing in 2025 is likely to make it more amenable to higher tariffs in 2024 to boost its growth. Moreover, after taking up a 33 percent stake in Vodafone Idea Limited (VIL), the government may also favour tariff hikes to support VIL’s survival, which in turn will improve the overall outlook for the tariff hike. This, along with the potential for at least a 30 percent rise in sector ARPUs, bodes well for the tariff outlook for the sector,” said equity research firm Jefferies in a note.

CLSA believes 2024 will be a crucial year for Vodafone Idea, especially since the company is unable to roll 5G despite the four-year moratorium on government payments of spectrum and Adjusted Gross Revenue (AGR) owing to delays in fundraising. The Wire article added that all this, despite the fact that the government has converted interest on its dues to equity.

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