By Jalaj Tokas

Published On: December 20, 2021 at 13:30 IST


India is currently the world’s second-largest telecommunications market, with 1.16 billion subscribers, and has experienced rapid growth over the last decade.[i] India’s mobile economy is expeditiously growing and will contribute significantly to the country’s Gross Domestic Product (GDP).

The Government of India’s liberal and reformist policies coupled with a strong consumer demand, have aided in the swift growth of the Indian telecom sector. The Government has not only provided easy market access to telecom equipment but has also ensured a fair and proactive regulatory framework to make sure that customers get telecom services at reasonable prices. Foreign Direct Investment (FDI) norms have been deregulated, making the industry one of the fastest growing and amongst top five job creators in the country.

The telecom sector in the nation has faced severe headwinds in recent years, owing to increased competition and pricing pressure, which has had a detrimental effect on revenue and profitability.

Despite the fact that companies, particularly Airtel and Vi, have long been advocating for a price increase, they were hesitant to take the first step fearing the loss of customers. Last month, Airtel took the plunge, and Vi quickly followed suit.

In response, Reliance Jio filed a formal written complaint with the Telecom Regulatory Authority of India (TRAI) against rival telco Vodafone Idea for allegedly creating a ‘barrier’ and making it even harder for entry-level customers to switch telecom providers.

The following writ-up tries to cover up the issue for its readers while indulging in its backdrop in an attempt to unscramble it.

Tariff Hike

Over the last few weeks, telecom operators Airtel, Jio, and Vodafone Idea have raised their tariffs, citing higher Average Revenue Per User (ARPU). Vodafone Idea and Bharti Airtel increased their prepaid tariffs by 20-25 percent late last month, with Vodafone Idea’s entry-level plan beginning at ₹ 99. However, the provider’s cheapest plan with free outgoing SMS service starts at Rs 179 and includes unlimited calling, 300 SMS, and 2GB of data.

With this tariff hike, however, the telecommunication companies have significantly reduced the benefits for some users. 

Airtel and Jio, for example, now offer Disney+ Hotstar perks with a single plan. The Vodafone Idea double data benefit, which provided 4GB of daily data with plans, has been reduced. Airtel has also dropped its Rs 558 plan, which included 3GB of daily data and a 56-day validity period.

For non-Jio Phone users, the cheapest denomination prepaid plan with free SMS service starts at Rs 91 for 23 days.

What is the issue?

In response, Reliance Jio filed a formal written complaint with the Telecom Regulatory Authority of India (TRAI) against rival telco Vodafone Idea for allegedly creating a ‘barrier’ and making it even harder for entry-level customers to switch telecom providers.

In a letter to Trai, Jio claimed that Vodafone Idea raised the lowest prepaid pack with free SMS to a higher tariff plan of Rs 179 in order to prevent prepaid users from leaving the network.

Interestingly, sending an SMS from the existing network is required to port to a different network. As a result, customers will have to spend more to transmit an SMS if the free SMS services are moved to a higher tariff pack.

While, lower-end customers may choose not to buy the more expensive plan, and those who have already purchased the new plan will not want to switch to a new provider, thus preventing customers from switching networks.

What is Mobile Number Portability?

Mobile Number Portability (MNP) is a service that enables a telecom service user to switch from one operator to another regardless of his geographic location.  If a subscriber is dissatisfied with his existing operator’s facilities, he can port his phone number to another network operator.

The maximum limit for the Per Port Transaction Charge is Approximately ₹6.46 only for each porting request made. Interestingly, sending an SMS from the existing network is required to port to a different network.

Subscribers who want to transfer their phone numbers must first submit an SMS to their service provider. After the MNP request is approved, a separate process begins, which might take three to five days for the customer to switch to a competing telco while keeping the same phone number.

Interestingly, 10.10 million customers sought portability of their mobile numbers in September 2021. (MNP). Since the implementation of MNP, total MNP requests have increased from 628.15 million at the end of August-21 to 638.25 million at the end of September-21.[ii]

Backdrop of the Issue

The telecommunication revival package may have brought financial respite to Vodafone Idea (VIL), but given its failure to catch up with Bharti Airtel and Reliance Jio on network capabilities and service offerings, the telecom company largely remains a fragile business with a falling subscriber base.

VIL may be able to continue as a going concern as a result of the relief measures, but the lack of relief on the balance sheet or in profit and loss may rule out any substantial shareholder value creation. Furthermore, because VIL continues to lag behind Bharti and Jio in terms of network capabilities (4G/5G) and service offerings, it may continue to lose consumers. 

Expert calculations show that VIL may need Arpus (Average realisation per user) of Rs 300-500 at various levels of subscriber base to manage its liabilities, even after turning deferred amounts to equity following the four-year moratorium.

Quite interestingly, every month, the firm has lost subscribers. In actuality, only Vodafone Idea’s user base dropped in the 2020 calendar year, out of the four telecom providers (including state-owned BSNL).

According to Telecom Regulatory Authority of India (TRAI) figures for 2020, Vodafone Idea’s wireless customer count decreased by 14.54 percent to 284.26 million in December 2020 from 332.61 million in December 2019. Reliance Jio’s subscriber base increased by 10.47 percent from 370.02 million in December 2019 to 408.77 million in December 2020, while Bharti Airtel’s increased by 3.49 percent to 338.71 million from 327.30 million during the same time. Even state-owned BSNL, which has been experiencing customer turnover owing to a shortage of 4G capabilities, increased its subscriber number to 118.71 million in December 2020, up from 118.21 million in December 2019. [iii]

Subscribers nowadays are merely switching operators, as the overall cellular subscriber base climbed only modestly to 1,153.77 million in 2020 from 1,151.44 million in 2019, a net addition of only 2.34 million.  

According to the report cited, Reliance Jio added 38.76 million users in 2020, followed by Bharti Airtel with 11.41 million and BSNL with 590,000 subscribers. Vodafone Idea, on the other hand, lost 48.36 million subscribers throughout the year, implying that Jio and Airtel gained those customers.

Due to a sharp drop in customers, Vodafone Idea’s market share fell to 24.64 percent in 2020, down from 28.89 percent in 2019. In reality, since the two businesses joined in 2018, Vodafone Idea has continually lost users, falling to third place in terms of subscriber market share from first place when the two firms merged in 2018.

Therefore, on almost every front, Vodafone Idea has been a slacker. The firm has the lowest Average Revenue Per User (ARPU) of the three private operators, and as a result it has been unable to invest in its network while losing consumers at a rapid rate.

All three carriers are in a competition to recruit new consumers. However, financially being the most vulnerable of the three, Vodafone Idea must urgently halt its precipitous customer losses.

Unscrambling the Issue

The telco’s ARPU and free cash flow are expected to improve as a result of the tariff hike initiated by Bharti Airtel. The much-needed network expansion and 5G rollout would be aided by incremental cash flows.

Due to their relatively high market share, Bharti Airtel and Reliance Jio are anticipated to benefit over Rs 7,500 crore in cash flow each. However, owing to the tariff hike, Vodafone Idea is expected to witness a higher margin expansion than its competitors, but subscriber retention will be extremely important to watch, as the hike could further erode the defunct telco’s market share.

The long-awaited tariff hikes are anticipated to kick-start the sector’s recovery, complementing the Centre’s September 2021 relief package. All three giants have raised their existing tariffs by around 20%, the first significant increase since December 2019.

These improvements are believed to improve the industry’s operating metrics, with industry ARPU anticipated to grow to around Rs 150-160 in the medium term, translating to revenue growth of 12-14 percent in FY23 (combined for the three telcos), and industry operating profit estimated to improve by 15-18 percent to around Rs 125,000 crore in FY23, thanks to the high operating leverage.

TRAI’s Ruling

The Telecom Regulatory Authoriry of India (TRAI), in a two page order, has directed telecoms to enable users to migrate their numbers to another provider, regardless of whether they are on a prepaid or postpaid billing plan. Reliance Jio Infocomm claimed just days ago that Vodafone Idea and Bharti Airtel’s tariff plans prevent customers below a specific price barrier from migrating out.

The regulator, while quoting Regulation 4 of the Telecommunication Mobile Number Portability Regulations, 2009, ruled that every access operator shall permit in its entire network, Mobile Number Portability (MNP) to all its subscribers, both pre-paid and post-paid, and shall, upon request, provide the same on a non-discriminatory basis.

The governing body went on to state that it had received numerous grievances from subscribers who were unable to send messages to port out to the short code 1900 despite having adequate balance on their phones, which is in violation of MNP regulations as it denies customers their ability to use the Mobile Number Portability service.

What can be Expected?

In an attempt to help the cash-strapped telecom sector, the Government of India allowed 100% Foreign Direct Investment (FDI) via the automatic route, approved a four-year moratorium on telecommunication services provider dues, and modified the definition of Adjusted Gross Revenue (AGR), among other things, earlier this year.

In the run-up to the rollout of 5G services in the country, domestic telecom service providers were expected to raise prepaid tariffs, providing a much-needed breather to the reasonably large sector.

The tariff hikes, which arrive just two months after the telecom reform package, are seen as critical aspects towards improving the telecom sector’s financial viability. Experts’ top telecom picks are Reliance Industries and Bharti Airtel, both of which are expected to benefit significantly in the medium to long term. To improve their financial health, these companies have stated that the Average Revenue Per User (ARPU) should be increased to Rs 200 at first, and then to Rs 300.

The tariff revision is viewed as a positive step toward strengthening the telecom industry’s business and improving cash flow as Indian telecom companies are now concentrating their efforts on increasing Average Revenue Per User (ARPUs) while maintaining active subscriber bases.

The expert jury is still not affirmative on whether the recently introduced telecom package and the tariff hike will benefit the telecom industry in the long run. Experts believe, however, that they would undoubtedly assist the sector with the much-delayed capital raise that is required to expedite network investments.


Vodafone Idea has been losing consumers due to enormous debt, weak profits, and large tax costs. Last year, it lost 18.8 million members. In order to survive, the loss-making telecom needs to reverse the customer loss momentum.

Meanwhile, Reliance Jio, the country’s largest telecom provider with 429.5 million subscribers, is working hard to hit the 500 million user mark. The business, which lost 11 million subscribers in the September quarter, had anticipated that introducing the JioPhone Next, a low-cost 4G phone in partnership with Google, would help it grow its user base by luring customers away from its competitors.

While the government has lost the extra revenue, the financial ramifications for telecom firms, who now have to pay back outstanding amounts that have been accumulating for years, are at a critical crossroads, with profitability under pressure and average revenue per user declining. 

Given that India is the world’s second-largest mobile data user, the way ahead would be to capitalise on the sector’s strengths while managing the pitfalls of regulation, changing technology, customer behaviour, and price.



Jalaj Tokas is a second Year Law student pursuing B.A.LLB from University School of Law and Legal Studies, GGSIPU, New Delhi. He is a life-long learner is self driven towards his ambitions. He strongly believes that expectations are premeditated disappointments and strives not just to be successful but more importantly to be of value.

Edited by: Aashima Kakkar, Associate Editor, Law Insider

[i] GSM Association, “The Mobile Economy Asia Pacific 2021” (last visited on December 12, 2021).

[ii] Telecom Regulatory Authority of India, “Highlights of Telecom Subscription Data” (last visited on December 12, 2021).  

[iii] Telecom Regulatory Authority of India, “Highlights of Telecom Subscription Data” (last visited on December 12, 2021).

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