New Delhi: Reliance Communications Ltd’s (RCL) announcement of a reduction in roaming tariff, which mobile subscribers pay when they are outside their own cellular circle, could end in a price war with other companies likely to do the same, predicted analysts.
RCL, India’s second-biggest cellphone services firm, cut roaming tariffs on incoming calls by 31-77% (40paise and Rs1.20) a minute, against the prevailing standard rate of Rs1.75 per minute.
RCL also cut rates on outgoing calls made by roaming customers and reduced tariffs for local calls from the standard Rs1.40 per minute to between 80 paise and Rs1.20; tariffs for long-distance calls were cut from Rs2.40 a minute to between Re1 and Rs1.20 per minute.
“Reliance Communications is changing the game to one of sheer volumes and the others will have no option but to follow suit,” said Harit Shah, telecom analyst with the Mumbai-based Angel Broking. He added that roaming revenues, which used to contribute around 10-15% of the revenues and an even greater proportion of profits for telcos, would likely see a fall in the short term. “But the experience so far has been that volumes have protected the bottom line.”
The latest price wars in the mobile telephony industry started with RCL’s introduction of ultra low-priced handsets in the beginning of the month. On 12 May, the company dropped international call rates to the US and Canada to Rs1.99 a minute, but was matched by Bharti Airtel Ltd on Monday. Last week, Bharti halved the price of its lifetime validity card to Rs495, but was matched by RCL. Operators such as Hutchison Essar Ltd and Idea Cellular Ltd followed suit. Bharti Airtel, RCL’s bigger rival, on Tuesday said it has not yet decided its response to the latest move by RCL.
Smaller companies said the moves would hurt profits. “We do not understand the game that is being played. As far as we are concerned, we have to look not only at the interests of the consumer, but also those of the shareholders,” said the chief executive of a telco, which has been forced to cut its prices.
The chief executive, who did not wish to be named, explained that customers of RCL, which operates on the CDMA technology platform, roam on the company’s own network, while customers of telcos using the GSM technology platform sometimes roam across operators.
Roaming revenues had to be frequently shared across two operators, he said.