Airtel, Idea bite tariff bullet: Cut promotional benefits, free mins

New Delhi: Within hours of agreeing that tariff hikes are becoming a necessity, Bharti Airtel said it has not implemented any headline tariff increase, which means there is no direct increase in voice tariffs.

It said in a statement that in most circles the company has reduced promotional benefits and free minutes on both acquisition (which means new SIM cards) and existing usage.

Rivals said the company has also reduced validity of its recharge coupons from three months to one month and has increased prices of some call vouchers for prepaid customers by up to Rs 15.

Similarly, the increase by Idea is also in terms of reduction in promotional benefits, without actually increasing call rates directly.

The question now is: is this the first step to increasing call rates directly eventually?

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[caption id=“attachment_599063” align=“alignleft” width=“380”] Earlier this month, Bharti Airtel and Vodafone hiked tariffs for 2G data services when Airtel revised its 1GB 2G data plan from Rs 100 to Rs 125. Reuters[/caption]

India is the cheapest telecom market in the world and due to fierce competition, telcos have been offering low call rates and freebies to generate new customers while holding on to the old ones. An earlier statement from Bharti pointed out that call rates have been actually falling for the last 12 quarters!

What had led telcos to raise tariffs through reduction in promotional offers are some factors such as a decline in competitive intensity with the withdrawal of some players from some key circles after they failed to wain spectrum in the last round of auctions.

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Also, exorbitant payouts which telcos have made and are in the process of making for spectrum acquisition charges are stretching their bottomlines badly.

Telcos had said before auctions were conducted in November last year that a base price of Rs 14,000 crore for 5 mhz of 2G spectrum (in 1800 mhz band) is too high (even though it was reduced from what sector regulator TRAI hadproposed). At that time, telcos had indicated that tariff increases were inevitable.

Now that Bharti and Idea have reduced promotional offers, we expect other telcos to also follow suit..