"India's telecom tariff still world's lowest despite 2x surge: ICICI Securities"

In a recent report by ICICI Securities, a comprehensive analysis of Indian telecom tariffs in comparison to global peers has been unveiled, shedding light on significant trends and projections for the industry.

The study, drawing insights from the ITU database, indicates that popular telecom plans in India have witnessed a more than twofold increase since July 2017. However, this surge has not deterred the adoption of data services, demonstrating an inelastic market nature and a growth in consumer surplus.

Global Affordability:

Despite the tariff hike, India's telecom services retain their status as the most affordable globally. The report highlights that Indian consumers enjoy the highest 'consumer surplus,' with tariffs as a percentage of Gross National Income per Capita (GNIpc) at a mere 1.11%. In comparison, the average tariff in economies with a GNIpc under USD 5,000 is 1.6%, positioning India favorably. The current tariff in India stands at USD 2, significantly lower than the global average of USD 4.

Regional Comparisons:

Among countries with a GNIpc under USD 10,000, India's telecom tariff is the second-lowest at 1.11% of GNIpc, with Brazil leading at 0.92%. The report underscores India's absolute tariff as the lowest at USD 2/month, showcasing a stark contrast with countries like Brazil (USD 6.1), Bangladesh (USD 2.9), and Indonesia (USD 5.8).

Elasticity and Erosion:

Despite a global trend of telecom tariff erosion, India stands out with a minimal 18bp drop in telecom tariff as a percentage of GNIpc from 2018 to 2022. This lower erosion is attributed to strategic tariff hikes by Indian telecom players, reinforcing the notion of inelastic telecom spending.

Headroom for Tariff Hikes:

The report suggests that India has substantial headroom for tariff hikes, especially in the wake of recent increases by major players like Reliance Jio and Airtel. The analysis indicates that consumers in India still enjoy significant 'consumer surplus' compared to global counterparts, and the digital adoption in the country provides a solid foundation for potential tariff hikes of ~1.5x over the next 4-5 years.

In conclusion, the ICICI Securities report paints a positive outlook for the Indian telecom industry, emphasizing its affordability, inelastic market dynamics, and the potential for strategic tariff adjustments in the coming years.