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RCom increases tariffs by 20-30%

It is rare for a telecom company to come out with a press release announcing an across the board tariff increase, but in an era of beaten down stock valuations, companies are taking desperate measures.

Reliance Communications, one of the companies that has the lowest stock valuation compared to its revenue and earnings, has announced wide ranging increases in call charges.

The company said it was announcing a “sharp reduction in promotional and concessional offers” and is the “only operator in India to” move its base tariff to 1.5 paise per second, compared to the earlier 1 paise per second.

Most GSM operators had moved from 1 paise per second to 1.2 paise per second.

The higher tariffs are expected to improve profit margins at Indian telecom operators, as well as help them raise money from the stock markets and elsewhere. Currently, valuations of Indian telecom companies are at their lowest, due to falling tariffs and profits.

A few days ago, Bharti Airtel, India’s biggest operator, said its March-quarter profit halved due to higher costs and lower margins.

Among the latest changes to Reliance Communications’ tariff schemes is cutting down the privileges of four of its ‘special tariff vouchers’ or STVs.

STVs are used by prepaid subscribers, who form more than 90% of the total consumer base, to lower call charges. They offer lower call charges than the standard 1.5 paise per second.

It has increased call charges for its Rs 21 and 48 STVs from 1 paise to 1.2 paise per second.

With the exit of low-cost operators like Videocon and Uninor from many circles, big, pan-Indian operators are increasing call charges.

Even Tata DoCoMo, which was the first to introduce 1 paise per second scheme across the country, has cut back on some of its cheapest offers recently.

Other operators like Vodafone, Bharti Airtel and Idea Cellular have always offered higher charges than Reliance Communications and others, pointing out that they had much better network coverage than new operators.

RCom said it was going ahead with price increases as customers continued to make calls at the same pace even after the last tariff increase.

“Our Headline Tariff increase from 1.2 to 1.5 paisa per second in October last year did not see any traffic elasticity and there has been no fall in customer demand or change in usage patterns, as we successfully migrated our entire base to the Headline Tariff,” Gurdeep Singh, Chief Executive Officer, Wireless, Reliance Communications, said.

“With the Indian telecom industry now heading for a phase of consolidation, with smaller operators shutting down or scaling down their operations and easing off hyper-competitive pressures, this will help pricing power move back to serious, long-term and pan-India scale operators and positively impact profitability. We have now corrected all Commitment Plans across the country and have increased tariffs by between 20 per cent and 30 per cent,” he added.

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