In The chairman of Airtel, Sunil Bharti Mittal, has said that mobile tariffs are set to rise significantly in days to come. Mittal said, The pressure on this industry will be acute as the operators will have to serve rural markets as well as low-end customers, who use only voice calls and SMSes. Only days ago, major telecom companies had raised their tariffs in some segments.
Factors like the entry of new players and the ensuing tariff wars, the high priced bidding for 3G auctions, which saw top operators like Bharti Airtel and Reliance Communications coughing up Rs.12,295 crore and Rs.8,583 crore respectively, have contributed to the margins being hammered. Bharti had, in fact, paid an additional Rs.3,314 crore for acquiring broadband wireless access (BWA) spectrum as well. There are 12-14 players in each circle, all vying for market share in the mobile telephony space.
Last month, leading operators, including Airtel, Vodafone-Essar, Tata DoCoMO and Reliance Communications, hiked their tariffs by as much as 20 per cent in some plans. Airtel raised tariffs for its Advantage and Freedom prepaid tariff packages, which are based on per minute billing, to 60 paise per minute for local and STD mobile-to-mobile calls. The tariff hike move by the market leader, Bharti, has given a break to the cut-throat competition among telecom operators offering dirt cheap tariffs.
After the last tariff hike, Airtel had issued a statement saying, Telecom is probably the only industry where, despite increasing inflation, tariffs have been falling unabated. Continuously declining margins, high 3G and BWA auction prices, constrained spectrum and rural rollout aspirations leave us with little choice but to make some price corrections.
From a user point of view, the worrying thing is that operators might use the indirect means of hiking prices, such as by reducing the validity of a recharge. This way people will need to spend more, thereby increasing revenue per user. In recent years, India has enjoyed one of the lowest telecom tariffs in the world, with some operators offering a per second pulse at the rate of half a paisa only, while others are offering a call rate of one paisa per second.
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