BANGALORE: A single naya paisa is still buying-power in India, if you are shopping for talk-time. Indeed, air-time is the cheapest commodity in the country now. But the days of falling mobile tariffs may be at its end.
"The price war is over," declared a senior official of a leading telecom operator , who did not want to be named. "Air-time prices have touched rock bottom and no imagination or innovation can help it go down further. Now it can be only a scheme where subscribers are paid for the calls they make. That will be suicidal."
Suresh Kumar, COO of Karnataka & Andhra Pradesh circles in MTS India , says voice tariff has hit a trough. "We already offer tariffs at half a paisa per second," he said, indicating it can't get better for customers. Atul Bindal, president (mobile services) in Bharti Airtel, says the company had always believed that the price war couldn't last. "It is unrealistic and uneconomical . Some operators have been offering prices much below the marginal cost of a call.'' The mobile telephony industry has been going through a difficult period , with low revenue growth, high pressure on margins, huge investments in 3G infrastructure and the 2G scam.
The year 2009-10 was bad for the entire industry, with an average revenue growth of about 5%. In 2010-11 , with greater stability in tariffs and growth in VAS (value added services) and data services, the revenue growth is estimated to be 10% to 12%.
Bharti Airtel's net profit declined by 31% in the last quarter, Reliance Communications suffered a net loss of Rs 758 crore in the last financial year. Some think that these pressures will push prices up.
"Over the next two years, operators will have to focus on customer delight and service innovation. This will result in higher input costs which may result in tariffs moving northwards," says Prashant Singhal, telecom industry leader in consulting firm Ernst & Young. Hemant Joshi, partner (telecom practice), in consultancy firm Deloitte Haskins & Sells, says operators might introduce offerings with assured uptime and quality at differential pricing. "In developed markets such pricing already exists for data products," he says.
V Venkatesh of Chith Consulting, a Bangalore-based business strategy consulting firm, says providers might withdraw some of their unviable, highly incentivized packages and discontinue certain tariff plans once the validity period is over.
He says focusing on non-voice and better ARPUs (average revenue per user) would help industry improve its revenue growth rate.
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