After the 5G auction, analysts expect telecom firms to raise prices again

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According to Nomura Global Markets Research, after the spectrum was acquired, telecom service providers would need to charge a minor incremental price increase of 4% on their whole subscriber base or a 30% premium above 1.5 GB/day 4G plans.

In the past, Indian telecom providers didn’t raise their prices for 4G plans in comparison to 2G and 3G data plans. In our opinion, telecom firms could charge more for 5G (compared to 4G) due to the possibility for faster speed on offer and the probable early uptake from premium customers (smartphones over Rs 15,000.) In the near future, 5G price plans would be important to follow, and 5G premium (vs. 4G) could be the next step in the telecom firms’ ARPU (average revenue per unit) growth.

We continue to anticipate a tariff increase before the end of [calendar year 2022] and see that as the sector’s next driver, according to Goldman Sachs.

In India, a similar trend is anticipated, according to Goldman Sachs Equity Research, which claims that 5G rollouts have not significantly increased capex for telecom operators abroad.

Story Highlights

  • Given the significant investments made in acquiring spectrum, we anticipate telecom firms will charge varying prices for 5G services. The amount of the premium over 4G pricing will, in fact, determine how widely 5G services are adopted. Despite two sets of significant pricing increases that were implemented in December 2019 and November 2021, respectively, telecom providers may boost tariffs for 4G services as well in an effort to secure widespread adoption of 5G. In the second half of the current fiscal year, we anticipate another rate increase for 4G services, according to Manish Gupta, senior director of CRISIL Ratings.

  • According to Nomura, the government has eliminated spectrum usage charges (SUC) for all spectrum purchased after September 2021. As a result of the significant SUC savings, the net yearly expenditure for businesses is expected to be close to Rs 7,500 crore.