Mobile operators are gearing up for the next round of tariff hikes in a bid to improve their margins. While the operators had last year increased tariffs by 20 per cent for pre-paid card users, a similar hike is now in the offing for post-paid subscribers on per-second billing. According to industry sources, the top three mobile operators are expected to increase calling rates for all mobile calls, STD and local, to 1.20 paise a second from 1 paisa per second. The tariff for all calls to landline phones is being raised to 1.5 paise per second.

Vodafone has already kicked off this fresh round of hikes with a 20 per cent increase on post-paid plans offering per second billing.

The operator's spokesperson confirmed that the new call rates have been implemented in Delhi and will be rolled out to other areas in phases.

“Other players will follow suit soon. This is inevitable considering that the operators' revenues are dipping.

The tariff cut in 2010 triggered by the entry of new players has made the industry bleed, with most operators reporting negative margins over the past few quarters,” said an industry source.

Tariff war

Two years ago Tata DoCoMo had ushered in a tariff war, offering per-second billing for the first time which forced everyone else to match it, defying all economic logic.

As a result of this, the average revenue per minute earned by the operators declined from Re 1 in 2007 to 40 paise in first quarter of 2011.Vodafone's profit after tax margins declined from 17 per cent in March 2007 to just 0.01 per cent in March 2011, while Bharti Airtel's return on capital employed decreased from 29 per cent in 2007 to 19 per cent, and Idea Cellular's operating expense as a percentage of revenue increased from 12 per cent to 31 per cent during the four-year period.

Then in July, market leader Bharti Airtel and many mobile players including Tata DoCoMo, Vodafone and Idea Cellular, increased pre-paid tariffs. “Continuously declining margins, high 3G and BWA auction prices, constrained spectrum and rural rollout aspirations leave operators with little choice but to make some price corrections,” an operator said.

Party over?

“In an attempt to focus on improving returns from existing operations, industry players are being forced to raise tariffs,” says a PwC report.

The impact of the last round of tariff hikes is beginning to show on operators' balance-sheets

. “Encouragingly, we are starting to see some of the price increases now holding in the market, so there are some benefits from pricing,” Vodafone said, in its annual report. While the hike in tariffs will improve operators' financial performance, the party for telecom consumers seems to be over.

> tkt@thehindu.co.in

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