Telecom tariff hike may not pinch as industry awaits Jio

Tags: News
With Bharti Airtel and RCom announcing tariff increases and other telcos expected to follow suit, analysts feel fresh price hikes may be more deliberate as telecom operators are bound to act with caution.

Telecom companies have been increasing rates over the past four quarters indirectly by reducing free minutes. The gap between base rate and the actual realisation is slowly filling out and hence average revenue per user (ARPU) has increased, said Ankita Somani, research analyst at Angel Broking.

Tariff increases would help further improve Arpu, a measure that indicates the financial health of telcos.

“Companies now have the headroom to increase prices unlike in the past. There is a virtual consolidation. The late entrants never made an impact and with some going out of the game, the top three or four players now have power, though limited, to increase prices,” Somani said.

But the players don’t have a freehand to hike tariffs at will.

Most of them are in a wait-and-watch mode. Companies are looking out for the launch of Mukesh Ambani-led Reliance Jio. The company, which has 4G operating licence, has decided to go solo and is expected to roll out services this year.

Earlier, if the base price was Rs 0.6 or Re 1 per minute, the realisation rate could be Rs 0.40. Now it has increased to about Rs 0.46 a minute. As telcos would want to increase it further, price hikes become inevitable, she added.

“Nobody knows whether they would foray into data alone. They may enter the voice business also. The group has deep pockets and is well capitalised. Telcos are waiting to see what Jio’s strategies would be,” said an analyst of a leading research firm, who didn’t want to be named.

Agrees Tanu Sharma, analyst at India Ratings & Research. Resurfacing of competition after Reliance Jio Infocomm’s entry could strain telcos’ pricing power and sustainability of margin improvement, she adds.

But the agency has revised its telecom industry outlook to stable from negative for this financial year.

The upgrade was triggered by the improved pricing opportunities in voice telephony and increa sing data revenues.

According to the recent data released by the Telecom Regulatory Authority of India, GSM average revenue per user (ARPU) increased to Rs 112 for the quarter ending December 2013, a growth of 14.06 per cent year-on-year.

Code division multiple access (CDMA) ARPU was up 29.58 per cent to Rs 104.

The increase is significant because ARPUs were decreasing or stagnant during the previous years.

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