In a surprise move, India’s three biggest mobile operators — Bharti Airtel Ltd.(Mumbai: BHARTIARTL), Vodafone India and Idea Cellular Ltd. — have hiked postpaid data tariffs in some circles (service areas).
Just months after increasing fees for prepaid customers, the operators have raised prices for subscribers on postpaid deals by as much as 20%.
Even in normal circumstances, it is difficult to increase tariffs tariff in a hyper-competitive market such as India. This move, however, is especially hard to fathom given the forthcoming launch of 4G services by Reliance Jio. The arrival of a new player, and especially a subsidiary of a company as big as Reliance Industries, seems bound to put further pressure on prices.
“In most of the circles, tariffs have been increasing in almost every segment over the last two years,” says Romal Shetty, a partner at KPMG International . “A key reason is that it is almost impossible to offer services at rock bottom prices. If they have to put up more towers for enhanced connectivity, they would need to spend more.”
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Nevertheless, other observers believe the tariff hikes might not be linked to RJio’s entry at all. Income from data makes up just 15-19% of the total revenues generated by India’s service providers. Moreover, as voice revenues continue to fall, service providers need to make up the difference through mobile data services.
“Festival season is round the corner and telcos might be looking at making a killing in the sales season before RJio’s launch,” says BK Syngal, a senior partner at Dua Consulting and a former chairman and managing director of VSNL (eventually taken over by Tata Group and renamed Tata Communications Ltd. ). “They do realize that they would need to bring down the tariffs once RJio launches operations, so it can be the Monsoon Hungama effect.”
Monsoon Hungama is the tariff package launched by Reliance Infocomm (Mukesh Ambani’s initial telecom venture in 2001), which offered devices and connectivity for as little as 501 Indian rupees ($7.50). It was a landmark tariff package, which made wireless connectivity accessible to the masses for the first time. It also forced the other players in the market to lower their tariffs.
The increase in tariffs might be the result of India’s latest spectrum auction, which was conducted in March this year. At the time, operators had issued a warning that tariffs would have to increase because of high spectrum costs. (SeeIdea, Airtel, Vodafone Splash Out on Indian Airwaves.)
Even so, the entry of a major new player into the mobile data sector will clearly have an impact, and most analysts agree that both voice and data tariffs are sure to fall again after RJio launches services.