NEW DELHI: Indians will soon have more than inflation and corruption woes on their plate. Consumers should now brace themselves for higher mobile tariffs that threaten to quickly reverse to 2008 pricing levels.
Market leader Bharti Airtel was the first to recently hike its tariffs by 20%, a move that was followed by several other leading telecom companies. However, sustainability issues suggest that tariffs may eventually move up by at least another 17%, if not more, before they stabilize.
The government increased competition in 2008 from 7 to 14 operators by advancing the argument of lower tariffs for the aam aadmi. This policy move now appears questionable, with data demolishing this premise. Apart from the fact that the industry is sending out strong signals for upward tariff revisions, China and Pakistan with merely five and six operators respectively offer tariffs that are comparable with India.
The Cellular Operators Association of India (COAI), which represents some of India's largest mobile operators, highlights that while the 'no cap' policy regime encouraging hyper competition led to a fall in tariffs for both voice and data, these reductions in call charges have not been matched by an increase in minutes of usage per connection per month. A COAI-PWC report shows that contrary to expectations, minutes of usage have experienced a drastic fall from a peak of 465 minutes/month in 2007 to 369 minutes in 2010 a decline of over 20%.
The COAI believes this threatens the sustainability of the industry and has presented a bleak growth outlook to the government on the anvil of National Telecom Policy 2011 and preparation of the 12th Five Year Plan. While data substantiates that call tariffs dropped from a high of Rs 15.50 in 1998 to an average of 50 paise/minute in 2010, the maximum reductions were before 2008.
The highest fall in tariffs was seen in 1998-2000, on account of a migration package that moved the industry from licence fee regime to revenue sharing. Tariffs fell 50%, from Rs 15.50 to Rs 7.30, a reduction of over Rs 8.20/minute. The second big reduction in tariffs came between 2001-2004 on the introduction of the third and fourth mobile operators by way of a multistage bidding process held in 2001. Tariffs fell from Rs 7.30/minute down to Rs 2/ minute, a reduction of Rs 6.30 in a three-year period, as BSNL, MTNL and one private operator/circle entered the fray.
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Market leader Bharti Airtel was the first to recently hike its tariffs by 20%, a move that was followed by several other leading telecom companies. However, sustainability issues suggest that tariffs may eventually move up by at least another 17%, if not more, before they stabilize.
The government increased competition in 2008 from 7 to 14 operators by advancing the argument of lower tariffs for the aam aadmi. This policy move now appears questionable, with data demolishing this premise. Apart from the fact that the industry is sending out strong signals for upward tariff revisions, China and Pakistan with merely five and six operators respectively offer tariffs that are comparable with India.
The Cellular Operators Association of India (COAI), which represents some of India's largest mobile operators, highlights that while the 'no cap' policy regime encouraging hyper competition led to a fall in tariffs for both voice and data, these reductions in call charges have not been matched by an increase in minutes of usage per connection per month. A COAI-PWC report shows that contrary to expectations, minutes of usage have experienced a drastic fall from a peak of 465 minutes/month in 2007 to 369 minutes in 2010 a decline of over 20%.
The COAI believes this threatens the sustainability of the industry and has presented a bleak growth outlook to the government on the anvil of National Telecom Policy 2011 and preparation of the 12th Five Year Plan. While data substantiates that call tariffs dropped from a high of Rs 15.50 in 1998 to an average of 50 paise/minute in 2010, the maximum reductions were before 2008.
The highest fall in tariffs was seen in 1998-2000, on account of a migration package that moved the industry from licence fee regime to revenue sharing. Tariffs fell 50%, from Rs 15.50 to Rs 7.30, a reduction of over Rs 8.20/minute. The second big reduction in tariffs came between 2001-2004 on the introduction of the third and fourth mobile operators by way of a multistage bidding process held in 2001. Tariffs fell from Rs 7.30/minute down to Rs 2/ minute, a reduction of Rs 6.30 in a three-year period, as BSNL, MTNL and one private operator/circle entered the fray.
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