RCom hikes mobile call rates, others may follow

In signs of mobile phone tariffs going upwards, Reliance Communications has increased call rates by up to 25 per cent for both post-paid and pre-paid customers.

Reliance Communications (RCom) increased the base tariff by 25 per cent to 1.5 paisa per second from 1.2 paisa per second, stating that "competitive intensity is tapering off and input costs are rising".

The company implemented the increase in base tariff in four telecom circles -- Bihar, Gujarat, Himachal Pradesh and Madhya Pradesh-- two weeks ago.

RCom will implement the new rates across India in the next 30 days. Customers seeking new RCom connection will have to pay the increased base tariff. Existing RCom customers, using plans with discounted charges, will have to pay new charges when validity of their current plans ends.

"Current prices are clearly unsustainable for a profitable growth. There is a clear evidence on the ground of competitive intensity coming down. From now on we are focusing on average margin per user and not average revenue," RCom President and CEO for Wireless Business, Gurdeep Singh, told PTI.

He said the very basic reason of competitive intensity started a couple of years ago when market moved to 1 paisa per second and number of players increased from 7 to 14.

"We have seen the death of 1 paisa in October last year. Less number of players in the market has lowered price intensity on the ground. This gives us enough room to redo our pricing," Singh said.

The Supreme Court in February had cancelled 122 telecom licences belonging to 8 companies. Of these eight companies, three have closed their operations in India.
Singh said the new call rates have impacted neither new customer addition nor minutes of usage.

"We have seen not changes either on new (subscriber) acquisitions or on minuses of usage. This clearly indicates that there is no elasticity to these price changes. Going forward, we feel that month after month we will see improvement in the revenue and the profitability," he said.

Meanwhile, a Citi Research report says Idea Cellular has has hiked call rates by 15-20 per cent and reduced validity by 17 per cent across three schemes (Rs 90, Rs 68 and Rs 37) in the Madhya Pradesh (MP) circle.

When contacted, the Idea Cellular spokesperson declined to comment on the report.