Telecom Lead India: Reliance Communications is planning to increase mobile tariff by 25 percent in a bid to enhance revenue.
Reliance Communications has reported 8 percent increase in revenue in the first quarter. But Indian telecom industry is concerned about rapidly increasing operational cost and high Capex towards 3G and 4G roll outs. Reliance Communications’ net profit grew 3 percent to Rs 162 crore from Rs 157 crore in Q1 previous year.
The increase in tariff is another indication of future trends in Indian mobile market. After the spectrum auction in November, the major players – Bharti Airtel, Reliance Communications, Vodafone and Idea Cellular – will increase their market dominance. Survival of mobile operators such as Uninor and MTS India, who triggered price war earlier, among others, will depend on auction result.
Increase in call rates is significant for Reliance Communications ahead of festival season to improve profitability. Reliance Communications, in the first quarter, said its EBITDA increased 3 percent to Rs 1,650 crore from Rs 1,602 crore in Q1 previous year.
Analysts said Reliance Communications is looking at enhancing wireless revenue that grew 7 percent y-o-y in Q1. Q1 wireless EBITDA increased 14 percent y-o-y. 25 percent increase will significantly improve Reliance Communications’
The tariff hike may set the stage for all leading mobile phone companies to go in for a second round of tariff hikes in the last 12 months. This will be the second bold step undertaken by the debt-ridden telco after it disconnected subscribers who had not used their phones for two months. This resulted in a 21-million decline in its subscriber base,
“We can expect further increase in rates going forward, since, competitive intensity has tapered,” Gurdeep Singh, CEO of the company’s wireless division, told Economic Times.
RCOM’s revised call rates will initially affect new customers and will be extended to its existing users when the validity of their current tariff plans expire. The company said it has revised its base price from 1.2 paise per second to 1.5 paise and this has initially been implemented in four states and be rolled out across the rest of the county within a month.
The move comes in the wake of its new strategy to track average margin per user rather than average monthly revenue per user.
