New Delhi: India’s telecom regulator has indicated it may have to intervene if telecom operators decide to increase tariffs.
“Over the last few years, the telecom tariffs were on a declining trend. However, recent trends as well as reports from the industry and analysts indicate a possible reversal of this trend,” the Telecom Regulatory Authority of India (Trai) said in a statement on Monday. “In this context, Trai has decided to examine the need to review the existing regime of tariff forbearance.”
Costlier calls: Many analysts predict tariffs will go up by around 30% by the end of the year as telcos try to cut losses and reduce debt. Hemant Mishra/Mint
Trai’s reference is to the present system that allows operators to set tariffs without the government’s interference, except for rural fixed-line services, national roaming services and leased circuits.
“A suitable tariff framework for data services is also required to be evolved considering that data usage is becoming more and more popular,” Trai added, while seeking comments from stakeholders.
Telecom operators are looking to increase tariffs to shore up revenues after a debilitating pricing war in 2010.
Many analysts predict tariffs will go up by around 30% by the end of the year as telcos try to cut losses and reduce debt, taken largely to pay for costly 3G spectrum in the 2010 auction and for a huge push into loss-making rural markets.
Operators have been looking at increasing tariffs since the middle of last year when Bharti Airtel Ltd, the country’s largest telco by subscribers, increased its average tariff to 1.2 paise per second from 1 paisa per second.
“They (telcos) are also being sent a number of penalty notices now, which will obviously affect the balance sheets,” a Mumbai-based analyst with a multinational brokerage said on condition of anonymity.
The tariffs, however, are being increased gradually and in a few circles at a time, mainly for prepaid subscribers who make up more than 96% of the mobile subscriber base in India. Most postpaid subscribers were not significantly affected by the tariff war.
In a recent interview, Sigve Brekke, managing director of Uninor, said he was waiting for larger incumbent operators to raise tariffs so his company could follow suit.
The cancellation of 122 telecom licences by the Supreme Court last week is also expected to cause a rise in tariffs, due to the decreased competition.
“Competitive intensity in the sector will reduce, leading to improvement in pricing power for the established players. With the number of operators likely to reduce, incumbent operators will be in a better position to hike tariffs,” Crisil Research said in a statement last week after the court verdict. “Moreover, operators who acquire licences under the new process are likely to raise tariffs to cover the higher licence fees. Consequently, telecom tariffs will increase significantly, resulting in improved profitability for the current operators.”
Uninor offers calls at as low as 2 paise per minute while Sistema Shyam Teleservices Ltd, which runs the MTS brand, offers calls at half-paisa per second under a special scheme.
The 2010 tariff war is considered to have kicked off by Tata Teleservices Ltd’s GSM brand Tata Docomo with a tariff of 1 paisa per second. Till then, the prevailing average tariff for the sector was Rs1 per minute.
shauvik.g@livemint.com