04:48 am - Wednesday 23 July 2014

Increase in mobile expenses: Airtel and Idea hikes call rates

By insightVAS - Thu Jan 24, 6:15 pm

In more than three years of time, now both Bharti Airtel and Idea Cellular have increased the call rates. This will affect the mobile bills of consumers that are set to rise up to 20-30 percent.

Vodafone, said it was inclined to follow price hikes by competitors. All other operators will also follow. It is because all the debt-ridden telcos attempt to improve margins after a long price war that had hampered the industry’s profits and revenues.

Both Bharti and Idea declined to provide specific details of tariff hikes.

This tariff hike issue has come up just before the advent of two important developments- a push by the government to scrap roaming charges and the second round of auctions for 2G airwaves.

The damage wrought by past decisions is proving hard to repair and a new proposal – to make roaming free – is adding to the confusion.

The Airtel spokesperson provided three examples – two related to slashing of talk-time for a recharge voucher in Punjab and Mumbai and one on reduced validity for a Delhi voucher. The company website too did not provide details of the revisions. Asked if customers were aware of the new rates, the Airtel spokesperson said “SMS reaches customers typically about 2-3 days before they are due to recharge“. Both these operators have a combined subscriber base of close to 300 million.

An Idea executive confirmed the company had reduced ‘freebies and discounts’, but declined to reveal further details, citing the ‘silent period’ before the company’s results are announced.
Bharti said it did not increase ‘headline tariffs‘, but had only ‘reduced promotional benefits and free minutes on both acquisition and existing usage’.

But, for consumers, this translates to an increase in call rates. For instance, Bharti and Idea have reduced the talk-time on special prepaid vouchers by up to 25 percent.

Bharti and Idea also slashed validity on prepaid vouchers by up to 30 percent, a step that will force the subscriber to use up talk-time faster.

Leading GSM operators had increased call rates by 20 percent in July 2011, but were forced to introduce discounts, including free minutes after that hike led to a fall in usage. India’s hyper-competitive telecom market has resulted in its 900 million users enjoying the lowest tariffs in the world. Close to 96 percent of mobile users are on the prepaid platform. Earlier this month, Bharti Airtel, Vodafone and Idea had increased 2G data rates by 25 percent to cover cost structures and spruce up margins, but left high-end data (3G) plans unchanged.

The tariff revisions are crucial as GSM operators such as Bharti, Idea and Vodafone are confronted with payouts amounting to billions of dollars in spectrum costs. The government has directed these three companies to jointly shell out over $2 billion as a one-time fee for airwaves they currently hold. They will also be required to spend huge amounts to renew their mobile permits in the metro cities during the March spectrum sale.

In an initial statement by Bharti Airtel, it is said that, ‘reiterating that increase in prices was inevitable‘. “This continuous decline in margins and increasing costs have had an adverse impact on the long-term financial health of the industry. This revision in prices is in line with these increasing costs,” the statement said.

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