Price war with satellite communications services likely in 2025 as tariff hike backfires, telecoms investment recovery in trouble

NEW DELHI: The country’s private telecoms operators face a dual challenge in the new year’s investment recovery: customers leave their networks after tariff hikes, while satellite operators, mainly Elon Musk’s Starlink, target their To survive the data business.

Private operators have invested approx. $An investment of Rs 70,000 crore in telecom infrastructure and airwave assets this year to expand the coverage of next-generation 5G services is one of the key highlights of the industry in 2024.

To recoup investments and protect profits, private telecom companies took steps to raise tariffs mid-year, but the move backfired.

About 20 million users were disconnected. Reliance Jio, Bharti Airtel and Vodafone Idea collectively lost Rs 26 crore of customers due to price increases of 10% to 26%.

Around 68 customers switched to state-run BSNL, which did not increase prices. The loss-making PSU still offers older generation 3G services and is rolling out 4G network across the country.

Despite subscriber losses, private companies will need to recoup their investments and invest more in 5G to deliver new-age services to drive future growth.

Prashant Singhal, EY India markets and telecoms leader, said the cumulative investment by Reliance Jio, Bharti Airtel and Vodafone Idea is approx. $It will reach 702 billion rupees in 2024.

Manoj Kumar Singh, director general, Digital Infrastructure Providers Association, said telecom infrastructure industry looks at cumulative investments $92,100 Crore Rs. $Rs 141 crore will be invested from 2022-2027 to support the 5G ecosystem.

Union Minister Jyotiraditya Scindia also supported telecom operators on the issue of tariff hike citing investment by network companies.

The launch of 5G services in 2024 paves the way for the adoption of emerging technologies such as artificial intelligence, which offer huge growth potential.

“5G deployment is a game changer. We have witnessed a significant increase in the number of 5G base station transceivers, from 412,214 in December 2023 to 462,854 in November 2024,” DIPA said. DIPA’s members include Indus Towers and American Tower Corporation.

Impending huge investments in 5G and maintaining healthy profit margins amid subscriber churn are not the only challenges facing private telecom operators.

A new threat from satellite broadband service providers is targeting private telecommunications companies in the new year. The satellite broadband industry has lobbied fiercely over 2024 spectrum allocations.

Private telecom operators led by Mukesh Ambani-driven Jio have been strongly protesting against the administrative allocation of spectrum to satellite broadband service providers such as Elon Musk’s Starlink.

Telecommunications companies worry that allocating airwaves to satellite broadband providers without auctions will be cheap and erode their data subscriber market share.

The government’s decision not to allocate satellite communications spectrum through auction has also triggered political vilification by opposition members, who equated the move with the 2G spectrum case. Comptroller and Auditor General of India says 2G spectrum allocation caused nominal losses $1.76 trillion to the national exchequer.

Scindia said that the country cannot forget the “2G scam”, a stain in the country’s history. “This scam not only resulted in huge losses $1,76,645 crore to the finance ministry but also gives the worst possible name to government-corporate collaboration, aka crony capitalism,” he said on X.

The minister reiterated that even the administrative allocation of spectrum to satellite communication operators will be done at prices recommended by the Telecom Regulatory Authority of India.

AK Bhatt, director general of the Indian Space Society, advocated the allocation of satellite communication spectrum as soon as possible, saying that this will help satellite communication operators launch services in India as soon as possible and bring unconnected areas into their coverage.

Analysts said the entry of satellite communications operators may delay telecom companies from raising mobile service tariffs, while new entrants may trigger a new round of price wars, pushing the industry into a new round of financial pressure and network investment of reduction.

Private companies like Vodafone Idea are already heavily in debt. it has been granted $Signed contracts worth Rs 30,000 crore with Nokia, Ericsson and Samsung to supply 4G and 5G network equipment for three years.

GX Group CEO Paritosh Prajapati said investments in the Indian telecom sector will continue as operators seek to improve their networks.

Prashant Singhal, EY India Markets and Telecom Leader, warned that the telecom industry must find a balance between tariff rationalization to recoup investment without affecting user experience.

“Telecom companies should not ignore low-paying customers, and in line with the government’s mission of inclusive development, there is a strong need to include them in the data-led digital economy. Operators also need to invest in building infrastructure throughout the digital economy including start-up with the rise of e-commerce Thrive,” said Singhal.

According to a joint report by Google, Temasek and Bain & Company, India’s internet economy alone is expected to grow six-fold and touch approx. $By 2030, India’s Internet economy will reach Rs 8,000 crore. The report estimates that India’s Internet economy is at $1286 Crores Rs. $1,450 crore in 2022.

Singhal said Internet companies or new-age businesses are generating high profits and their corporate social responsibility funds can be used to build rural and remote networks where returns to telecom operators are lower.

Telecom industry body COAI has been pushing for revenue sharing with big foreign tech companies such as Google, Amazon, Facebook, WhatsApp and others as videos, images and other content on these platforms consume an estimated 80% of bandwidth.

“The large amount of traffic generated by LTG puts extreme pressure on telecom networks, forcing TSPs to invest additional $According to our research, investment in infrastructure construction will reach 100 billion rupees by 2023.

SP Kochhar, Director General, COAI, said, “While TSP bears these costs, LTG, without contribution, accumulates multiple revenues through subscriptions, advertising and data-driven marketing, which are largely beyond India’s tax coverage.”

Telecom companies have also been hit by equipment theft this year, he said.

Telecom equipment theft has become a major issue affecting TSPs in India, estimated to cause $Kochhar said it has caused a loss of Rs 800 crore, causing significant disruption to 4G/5G expansion and affecting the quality of mobile services.

Additionally, as 2024 comes to an end, the pesky scam call threat has yet to be resolved, and scammers powered by high-speed 5G networks have developed new strategies such as digital arrests and abusing artificial intelligence to extort money.

This article was generated from automated news agency feeds without modifications to the text.