Indian Networks Hike Voice Call Costs for PrePay Customers

Published on: 23rd Jan 2013

­Two of India's largest mobile networks, Bharti Airtel and Idea Cellular have announced price hikes that in some cases see the effective cost of voice calls double in a move that may signal the end of the cut-price competition in the market.

Rival networks are watching the developments closely and industry analysts have welcomed the move as it will help to put the industry on a more stable footing financially

"We have been reiterating that increase in prices is inevitable, which is reflected from the fact that despite rising costs, tariffs have been falling over the past 12 quarters," Bharti Airtel said in a statement. "This revision in prices is in line with these increasing costs."

Voice call revenues account for about 85 percent of the telecom industry turnover despite being some of the lowest rates in the world. The rates for prepay customers have risen and the networks are also cutting back on the free calls allowances offered on some tariffs.

In a statement, Vodafone said that it welcomes the "price rationalization for bonus cards, Special Tariff Vouchers and free minutes from our competitors." 

The company confirmed that it is are studying the development. "We are inclined to follow to maintain consistency and competitive position though we haven't decided on our precise circle-wise moves." it added in the statement.

The ratings agency, India Ratings recently said that it sees limited opportunity for telcos to grow revenue by adding new subscribers and would expect the operators to focus on increasing revenue per customer in the future.

Likelwise, Mr. Sivarama Krishnan, executive director, PwC India commented: "Capping free minutes as well as call vouchers is essentially working around the benefits extended to consumers but understandably call prices will also go up in a phased manner if the industry has to keep sustainable service delivery."

The move may also benefit the government in the upcoming auction of unsold GSM and CDMA radio spectrum. If all the operators raise tariffs, that either opens an opportunity for a low-cost competitor, or more likely a new entrant seeing greater potential to realize a sensible return on their investment.

 

Tags: [bharti airtel]  [idea cellular]  [India]