Are increased mobile tariffs paying the price for slashed broadband rates?

The Indian wireless industry has 851.70 million mobile subscribers as of June 2011, and this figure is set to grow to 1.159 billion mobile subscribers by 2013, exceeding even the world’s largest populated economy – China’s projected wireless subscriber growth. The only market with 14 operators and the lowest tariffs in the world, India’s wireless telephony growth is one of the best in the world. However, the recent decision by operators to raise voice tariffs, in order to curb falling ARPUs may bring a twist to the tale.


While the initial call tariffs in 1995 were Rs 16 per minute, 15 years hence, the cost of a voice call has dropped to 30 paise for local calls today. The huge fall in tariffs has caused an equally sharp fall in profits for cellular operators, who have now decided to raise tariffs slightly, in order to remain financially stable. All cellular operators have been speaking for some time about the need to raise tariffs, especially with growing competition in the market, but the burden to pay off 3G debt and rollout costs, seems to have propelled them into action.

Tata DOCOMO was the first to start the trend, announcing on July 1 an increase of 67 percent on SMS tariffs to Rs 1, from 60 paise earlier for local SMS, and from Rs 1.20 to Rs 1.50 for national SMS. STD tariffs were doubled to 2 paise per second, from the popular per-second billing, which Tata DOCOMO itself had started a year ago.


Bharti Airtel was next to raise voice and data tariffs on July 22. Intra-operator calls were raised by 10 paise from 50 paise to 60 paise, while mobile to landline rates were increased from 75 paise to 90 paise. Local SMS rates were also raised to Rs 1, while STD SMS was increased to Rs 1.50.

Next in line were Vodafone and Idea Cellular, who increased prepaid tariffs by 20 percent. Vodafone increased STD voice tariffs rates in 12 of its 22 telecom circles, by 1.2 paise per second to 1.5 paise per second in various regions. Meanwhile, Idea Cellular hiked rates for STD calls, inter-operator calls, and SMS in five of its telecom circles including Kerala, Delhi, Bihar, Jharkhand, Punjab and Gujarat by 1.2 paise per second for STD and inter-operator calls, and Rs 1-1.5 for both local and STD SMS.


The latest operator to have increased call tariffs is Reliance Communications, whom on August 15 announced a 20 percent rise in voice tariffs, from 1 paise to 1.2 paise per second, for both its GSM and CDMA customers, in almost all its operating circles.


While it is unclear whether greenfield operators like Uninor and Videocon will also follow suit and raise tariffs, experts feel they are unlikely to do so, since they need to build their subscriber base. However, Uninor has said that it will wait and watch how the situation unfolds. Meanwhile, PSU operators, MTNL and BSNL have announced that they will not be raising tariffs, and MTNL has instead announced a special Home Zone Plan, under which call charges for subscribers in Delhi and Mumbai will be 1 paise for four seconds.


Operator ARPUs have fallen from 76 paise in 2009 to 39 paise in 2011 for outgoing calls. While CDMA operators first felt the heat seeing an outgoing of 51 paise per subscriber, at a time when GSM operators earned 20 percent more, GSM operators saw a drastic fall in their call tariffs, after adopting per second billing that was introduced by Tata DOCOMO.

However, telecom regulatory body TRAI, has now asked all the above operators to justify the increase in tariff rates, and provide the former with details of the increased rates. This is in a bid to protect both the subscriber and operator’s interests, since call tariffs have not been increased since the past 2 years. As per TRAI guidelines, operators are required to notify TRAI regarding change in tariff plans, introduction of new plans or changes in call rates within 30 days. TRAI had also sought details from operators earlier in the year, regarding per second billing, on the pretext that greenfield operators were resorting to unusually low tariffs in order to lure subscribers.


By Beryl M

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