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After Airtel, other operators may increase tariff

india Updated: Jul 24, 2011 14:47 IST

Small telecom operators will heave a sigh of relief with telecom giant Bharti Airtel's raising tariffs by over 20% as others can now follow suit and try improve on margins which were under pressure since past few years, experts say.

"The good thing about Airtel's move is that when a major player takes such initiatives, there is no problem for smaller operators to follow suit. They will be happy to get a little more revenue. They would have little incentive in keeping the tariffs down," Mahesh Uppal, a telecom analyst and director of consultancy ComFirst India, told IANS.

Bharti Airtel Friday announced a 20-25% hike in its tariffs in selected regions across the country including Delhi, Andhra Pradesh, Kerala, Rajasthan, Madhya Pradesh and Gujarat.

"Telecom is probably the only industry where despite increasing inflation, tariffs have been falling unabatedly. Continuously declining margins, high 3G and BWA (broadband wireless access) auction prices, constrained spectrum and rural roll out aspirations leave us with little choice but to make some price corrections," the company said while announcing the hike.

It has given a break to the cut-throat competition among telecom operators offering dirt cheap tariffs.

Idea Cellular refused to comment if the company would follow Airtel's move, but an executive said on the basis of anonymity: "It is a well thought of decision, tariffs were really at top-bottom and it was becoming difficult for telecom operators to sustain for long."

"One operator's strategy is not that of every one. We study the market and then come up with our own strategy," he said.

A stage has come where telecom tariffs had reached the lowest in the world and it was impossible to go on indefinitely, said another leading telecom operator.

With the entry of new players and the ensuing tariff wars, the high priced bidding for 3G auctions, which saw top operators like Bharti Airtel and Reliance Communications coughing up Rs.12,295 crore and Rs.8,583 crore respectively, had led to margins being hammered.

Bharti had in fact paid an additional Rs.3,314 crore for acquiring BWA spectrum as well.

"Telecom operators have been bleeding owing to tariff wars. Airtel's move marks a beginning, more or less it had to start now," said an official from Reliance Communications executive on the basis of anonymity.

In the last 1.5 years, value-added services (VAS), which an operator offers as additional services, have not been able to show desired results, he said.

"The VAS contribution to the revenue should at least be 35%, not everyone is getting to that level. It has not been as it was expected," said the executive.