Call cost: Bigger toll on wallet likely

Get ready for higher cellphone bills. Telcos say that despite a swelling client base, telecom service usage remains low and this could lead to subsequent hikes in the form of “rationalisation of many below-cost populist schemes”.

Bharti Airtel, the country’s largest private operator, chairman Sunil Bharti Mittal told ET that the sector had reached a stage where prices could not decline any further and would only firm up in the future.

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Ditto for Vodafone Essar’s managing director Asim Ghosh and Idea Cellular MD Sanjeev Aga who say it’s unrealistic to expect any further reduction, while adding that low-cost packages will have to be re-aligned.

A CEO of another telco, who did not want to be named, said that with costs going up, it was only natural that tariffs, too, would increase. However, the picture is not totally gloomy. Most operators say the tariff increase will not be dramatic and will primarily revolve around correction of low-cost packages.

Mr Mittal said recent tariff hikes were necessary as many tariff packages were being offered below cost. “Going forward, operators will be forced to rationalise such packages,” he added. Endorsing a similar stance, Mr Aga said, “Since there are hundreds of packages, there will always be adjustments as determined by market forces.”

Despite the recent uproar over the hike in SMS, local and STD call charges by some operators and regulator TRAI’s unhappiness on the issue, Mr Mittal remains unperturbed. “Given the tariff level where we are today, the lowest in the world, and the fact that there is no proportional increase in cellular usage as compared to the growth, cellular tariffs will only firm up in the future,” he said.

At the same time, Mr Mittal also ruled out any major hikes and said that Indian operators would still continue to offer the best value for money. “Thankfully, mobile tariffs in India are in paisa; so, any increase will therefore also be in paisa,” he added.

While pointing out that a continuous decline was unrealistic, Idea Cellular’s Mr Aga explained that even for the most profitable of operators in the country, the realised rate of return was just 80 paise per minute, of which over 20 paise went to the government in the form of various levies.

“The net realised rate is less than 60 paise per minute for all operators. Expecting revenues to fall further is unrealistic, any further decline will not be good for the sector, nor for the economy and also for the consumer in the long run.”

“People who are expecting our prices to drop to zero must recognise that for any venture to survive, it needs investments, which, in turn, requires healthy revenue streams,” says Vodafone Essar MD Asim Ghosh.

Last month, telecom operators Bharti Airtel, Vodafone Essar and Idea had increased local call charges on select tariff plans by 20% to Rs 1.20 per minute for pre-paid customers from Re 1 per minute. Prior to that, most private GSM players also hiked STD tariffs by over 10% for pre-paid users, Bharti, Idea and Vodafone Essar increased their STD tariffs to Rs 2.65 per minute against Rs 2.40 earlier.

The upward revision of tariffs had led to the department of telecom asking TRAI to examine the issue, even as communications minister A Raja said the government was examining the possibility of introducing number portability to protect the interests of customers.

In fact, this comes even as Mr Raja is pushing for a further reduction in rates. Incidentally, the minister is slated to meet TRAI chairman Nripendra Misra to discuss if further tariff cuts can be enforced.

While TRAI cannot directly intervene as all tariffs including those of SMSes are under forbearance (to be determined by market forces), sources in the regulatory agency say that it could always launch a consultation process and initiate action in cases where it felt that “tariff packages are not consumer-friendly and transparent or when market forces have remained ineffective”.

A top executive with a leading operator said that Indian users who had constantly witnessed fall in tariffs, were weighed down by expectations that this would continue infinitely.

“While the cost for every commodity in India is going up, telecom is a unique sector where all customers expect tariffs to fall despite being the lowest in the world. Customers must realise that the costs of setting up networks, rollout, real estate, equipment and personnel have gone up by several multiple times over the last couple of years,” he added.
 
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