Rupee pain: After airfares rise, telecom tariff next in line

It is raining bad news for the consumers ahead of the festival season. If indications are anything to go by, sending that festival greetings SMS is likely to be costlier this year as telecom companies are likely to increase tariff.

A report in the Economic Times has said that Reliance Communications has indicated that the company is likely to increase its tariffs soon.

The reason behind the tariff increase? Again, the rupee.

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According to the report, telecom operators import a lot of equipment and machinery and the rupee’s decline to the 66-67 levels is pushing up their input costs.

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The rupee decline is impacting the cost diesel, which also has bearing on the telecom operators’ input costs, the report said. The fuel is used widely used for running their base stations, said the report.

“Further price cannot be ruled out,” president & CEO of RCOM’s wireless business Gurdeep Singh has been quoted as saying in the report.

In October-November 2012-13, telecom companies had started increasing tariffs, signalling an end to the phase of intense competition that had weakened the pricing power in the sector.

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The operators’ profitability had declined over last few years as they held on to rock bottom tariffs to woo customers. That golden era for customers is all but over.

In May, Reliance Communications increased tariff by 25 percent. All the players had increased call charges during the April-June quarter, improving their profitability.

Once Reliance Communications increases its charges, all other companies are sure to follow.

An earlier report in the Economic Times quoted a telecom industry official as saying that the companies will have to increase the tariff by 10 paise per minute.

“All we want is a 10 paise (per minute) more from customers. And that too, over a period of time, not at one go. I am sure they (customers) won’t mind,” the official was quoted as saying in the report.

The report also said that once the merger and acquisition norms are in place, the sector will see consolidation reducing the number of players in the market. In such a scenario, the companies will be better placed to increase the charges. The M&A norms are expected in two months.

In short, consumers will have to get ready to pay higher phone bills at a time prices of virtually everything are on an upswing.