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.
"The
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 added.
Earlier this month,
Reliance Communications raised call rates by 20-30 per cent 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 company.
"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 per cent, this will not hugely impact their businesses.
"Continuously
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.
Rishi
Tejpal, 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.
On 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."
Even
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.
"It 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.
