Anil Ambani controlled Reliance Communications (RCom) raised call tariffs by 20 per cent. It also said that it also has cut certain discounts.
RCom, which is due to its report quarterly earnings on Friday, said that it is increasing calling rates to 1.2 paisa a second from 1 paisa in some plans. This is, however, still below its base price of 1.5 paisa a second. According to the new price revision, people availing lower tariffs through bulk plans, or packs, will now have to pay a higher price. In October, the company had revised its base price to 1.5 paise per second from 1.2 paise.
“With smaller operators shutting down or scaling down their operations and easing off hyper-competitive pressures, this will help pricing power move back ... and positively impact profitability,” Gurdeep Singh, Reliance Communications’ head of mobile business, said in a statement.
Till recently, operators shied away from increasing tariffs and have been offering steep discounts to win customers, which had negative impact on margins.
But after February 2012, when the Supreme Court cancelled 122 telecom licences given during A Raja regime, telecom operators are increasing tariffs regularly taking all the advantage of reduced competition as several smaller firms have either shut down or scaled back operations in response to a court order.
In the last one year, all the bigger companies such as Bharti Airtel, Vodafone and Idea Cellular have cut discounts on voice calls, effectively increasing prices. Telecom analysts say that operators are likely to further cut discounts and free minutes in order to boost revenue.
However, the operators have been smart in not increasing headline, or base, tariffs and rather resorting to indirectly increasing tariffs by cutting on freebies.
RCom offers the lowest rates among the industry and has lower average revenue per user than even some of its smaller competitors like Idea Cellular. The move will help the company to increase its margins and reduce its Rs37,000 crore.
“Our Headline Tariff increase from 1.2 to 1.5 paisa per second in October last year did not see any traffic elasticity and there has been no fall in customer demand or change in usage patterns, as we successfully migrated our entire base to the Headline Tariff. With the Indian telecom industry now heading for a phase of consolidation, with smaller operators shutting down or scaling down their operations and easing off hyper-competitive pressures, this will help pricing power move back to serious, long-term and pan-India scale operators and positively impact profitability,” Singh added.