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Reliance Communications has increased mobile phone tariffs by over 20 per cent. This is the second round of increases in six months as operators look for better profitability, in a market where the intensity of competition has weakened.
In the latest round of tariff hikes, Reliance Communication has increased the price of services offered under special pre-paid vouchers called Commitment Plans. These tariff plans are offered to consumers who are prepared to commit a certain amount of money for which they get discounted rates. In October, RCom had increased headline tariffs by 25 per cent — from 1.2 paise a second to 1.5 paise a second. Headline tariffs are the base tariffs paid by normal users who are not using vouchers with discounted rates.
Fewer free calls
Nearly 40 per cent of the pre-paid users buy special vouchers with freebies and discounts.
While RCom has left the headline tariffs intact it has now jacked up the price on special vouchers. For example, there’s a tariff plan called STV 46, which came with 200 minutes of free calls within RCom's network.
Users will now get only 140 minutes under this voucher. Confirming the move, Gurdeep Singh, Chief Executive Officer, Wireless, Reliance Communications, said: “After having successfully migrated our entire base to the headline tariff plan of 1.5 paise per second, we have not seen any traffic elasticity — there has been no fall in customer demand or change in usage patterns. The Indian telecom industry is now heading for a phase of consolidation, with smaller operators shutting down or scaling down their operations. This has seen pricing power move back to serious, long-term and pan-India scale operators.”
The new tariffs will apply to all existing and new customers. All tariff increases are effective immediately.
Weaker competition
Other mobile operators are also looking to tweak the tariff. Bharti Airtel and Idea Cellular had earlier announced that they were cutting down on freebies, discounts and pre-paid card validity period.
The tariffs are increasing because the level of competition in the market has decreased after the Supreme Court cancelled all the licences issued in 2008, pushing as many as five players out of the market.
Some of these new players had launched very aggressive pricing to gain market share.
This forced the incumbent players to follow suit but at the same time it had a negative impact on the companies’ profits. But with these players out of the market, telecom service providers such as RCoM, Bharti Airtel and Idea Cellular can afford to take the price back to pre-2008 levels and even beyond.
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