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Order to edge out smaller players, inflate phone bills

The Supreme Court's judgment on Thursday scrapping 122 licences granted in 2008 and its ruling asking government to auction radio frequency will push up companies' costs, reduce competition and may nudge firms to raise tariffs to maintain profit margins, experts said. Manoj Gairola reports.
By Manoj Gairola | Hindustan Times, New Delhi
UPDATED ON FEB 03, 2012 01:48 AM IST

Your mobile phone bills are set to rise.

The Supreme Court's judgment on Thursday scrapping 122 licences granted in 2008 and its ruling asking government to auction radio frequency will push up companies' costs, reduce competition and may nudge firms to raise tariffs to maintain profit margins, experts said.

"We are looking at an increase in tariff by about 30% in the next one year," CEO of an existing telecom service provider said.

"We were not able to reduce tariff earlier as the market was hyper competitive and we were offering tariff on the basis of what the competition is offering and not on the basis of our business plans."

Currently, there are about 10-12 operators providing services in a circle, making India one of the most competitive markets in the world. As a result, prices of telecom services in India are one of the lowest in the world.

Telecom service costs had slumped by as much as 50% when the new players started offering services. The new players had also offered innovative tariff schemes.

For example, the new GSM players started charging from the consumers on a per second basis, as opposed to per minute offered by incumbent players. In other words, earlier under the minute-based pulse rate method, a consumer had to pay for one minute even if duration of a was 15 seconds.

A second-based pulse system has benefitted the consumers on two counts — reduced tariffs and innovative market schemes that reduced their monthly phone bills.

“There will be an impact on tariffs. Prices may go up to 15%,” said Mahesh Uppal, a Delhi-based telecom consultant.

“However, India will still remain to be the most competitive market in the world. There will still be six players in the market,” said Uppal.

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