The ongoing telecom crisis is set to hit the customers hard with two of the country's largest telcos - Bharti Airtel and Vodafone - deciding to hike tariffs from December 1 after they posted historic losses on account of provisioning for the AGR pending dues.
In what smacks of cartelisation shaping up in the sector, Bharti Airtel and Vodafone Idea on Monday came out with strikingly similar statements to announce the tariff hike decision. Both companies also announced the tariff hike within a few minutes of each other and both did not reveal the quantum of hike.
"The telecom sector is highly capital intensive with fast-changing technology cycles that require continuing investments. It is, therefore, extremely important that the industry remains viable to support the vision of Digital India," Bharti Airtel said in a statement.
"Accordingly, Airtel will appropriately increase price offerings in the month beginning December," it added.
Vodafone had also noted that the acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high-level committee of secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief. It had said it would "suitably increase the prices of its tariffs" effective from December 1.
The quantum of losses incurred by the two telcos have made their operations unsustainable. In fact, Vodafone has hinted at not being able to remain as a going concern if relief does not come for the sector.
In such a scenario, tariff hike has not only become inevitable but a must survival strategy. The two of the hardest hit telcos coming together to announce similar measures seems to be a building up of a strategy where the players would like to explore synergies that could reduce their burden. However, both companies have so far not indicated such a possibility.
Airtel and Vodafone Idea had posted a combined loss of Rs. 74,000 crore in Q2 following provisioning for the AGR pending dues. Vodafone has hinted at not being able to remain as a going concern if relief does not come for the sector.