Indian mobile telephone companies have come a long way and no longer
perceive lowering prices and increasing subscribers as tools for
survival. To ensure their sustenance, telecom players in India are
slowly hiking call rates and doing away with promotional offers.
reason behind increasing call rates is that none of the players has a
serious incentive to lower prices. The intensity of competition has come
down after many players left the Indian market following cancellation
of some licences after 2G scam," Mahesh Uppal, director, Com First
telecom consultancy, told IANS.
Now the telecom players are
concentrating more on usage and not on the number of subscribers.
"Certainly not on the number of SIM cards they are selling," Uppal
Earlier this month, Reliance Communications raised call
rates by 20-30 percent across India. Bharti Airtel did away with its
promotional offers in January. But Idea Cellular does not plan anything
of that sort yet, said Rajat Mukarji, chief corporate officer of the
"The cost of spectrum has gone up. The cost of providing
services has gone up. The companies are not trying to undercut one
another despite being competitors. The problem seems common to all the
telecom operators. The competitive market is still sufficiently
competitive to deter collusion," Uppal added.
According to Romal
Shetty, head (telecom) for KPMG in India, rates in the country "are the
lowest in the world. The quarter-on-quarter results of the telecom
companies show that they are clocking lower margins. The EBITDA
(Earnings Before Interest Depriciation and Amortisation) margins are
under pressure. Lowering prices does not result in a competitive
advantage. The companies are struggling to survive."
He opined that even if the telecom operators increase prices by 10-20 percent, this will not hugely impact their businesses.
lowering prices was proving to be counter-productive. Even the quality
of customer service was going down. At times, it is important to apply
some checks and balances as well," Shetty told IANS.
Principal Research Analyst, CSP Business Strategy, Gartner Technology
& Service Provider Research, said telecom companies in India have
seen constant declining margins in the last few quarters. The Average
Revenue Per User (ARPU) in India is among the lowest in the world.
hiking call rates, he said: "This step has been taken to rationalize
margins. The operators had been thinking about this for quite some time;
now they have put this into action as they are now left with no other
options, considering the increasing costs and declining margins."
Reliance Communications, while increasing prices, said in a statement
that the Indian telecom industry was now heading for a consolidation
phase, with smaller operators shutting down or scaling down their
operations and easing off hyper-competitive pressures. This will help
the pricing power move back to serious, long-term and pan-India
operators and positively impact profitability.
Tejpal said rising
call rates are usually linked with declining usage and thus the impact
on ARPU (average revenue per user) might not be significant. But average
revenue per minute will be impacted and it will go up, he added.
is too early to say whether ARPU will actually go up or go down, but
the average revenue per minute will definitely increase. It will take
atleast another quarter or so to see whether it is impacting an
operator's revenue. Some of the operators have not directly increased
rates but have reduced freebies and promotional offers, which will make
the average user to pay nearly 20-30 percent more," Tejpal added.