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Why telecom companies are asking DoT to reduce 5G prices by 60-70%

Industry body knocks on government’s doors on behalf of cash-strapped telecom companies looking for relief.

The Cellular Operators Association of India (COAI) representing major telcos Airtel, Jio, and Vodafone has asked the Department of Telecommunications (DoT) to cut 5G base prices by close to 60%, according to a PTI report.

“COAI has asked the government for a drastic cut in spectrum price for the proliferation of digital connectivity and specially for ushering 5G services. It has requested the government to reduce the base price by more than half in the proposed spectrum auction,” a telecom operator representative told PTI.

A COAI representative confirmed that a letter was sent to the department but declined to share its contents with MediaNama, citing the need for confidentiality.

Due to highly competitive pricing in the past few years, India’s cash-strapped telecom companies are now looking to tariff hikes and sectoral reforms for some relief. The DoT might need to factor that in while setting 5G spectrum prices or accept the increasing tariffs and a delay in 5G adoption in India.

Telcos warn of no takers for 5G if prices remain the same

Telecom companies have recently warned that 5G spectrum rates need to be reasonable, or else the companies will not be able to participate in the 5G auctions:

  • Vodafone: In a recent analyst call, Vodafone MD Ravinder Takkar said that if the base rates for the 5G spectrum are not brought down, there will be no takers for the airwaves, ET has reported.
  • Airtel:  “We hope pricing on spectrum is made attractive by the government to ensure India benefits from a robust 5G ecosystem,” Airtel Chairman Sunil Mittal said in a recent investor call. He said that 5G Capex should not be “significantly higher” as compared to 4G.

Airtel raises tariffs, Vodafone and Jio follow

Last week, Airtel announced a 20-25% increase in tariffs for prepaid plans. The new prices will give Airtel “the elbow room to roll out 5G in India,” the company said in a press release.

Following Airtel’s announcement, both Jio and Vodafone have increased tariffs to the tune of 20%. Explaining the hike, Airtel said in the press release:

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“Airtel has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at Rs 200 and ultimately at Rs 300, so as to provide a reasonable return on capital that allows for a financially healthy business model.” – Airtel Press Release

A stressed telecom sector means that urgent reforms are needed to maintain the status quo, or sharp price hikes are not too far into the future. “We have seen the worse now in terms of tariff wars and ARPU contraction,” Airtel Chairman Sunil Mittal said reently, indicating that tariffs will only rise from hereon.

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Figuring out subscriptions and growth at MediaNama. Email: nishant@medianama.com

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