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Voice Price War, Reliance Jio’s 4G Launch May Check Rate Hikes

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Mobile users don’t need to fear that the upcoming spectrum auctions will push up tariffs this year, thanks to return of a voice price war and Reliance Jio Infocomm’s impending 4G launch, but higher cost of airwaves post auctions may squeeze telcos’ margins and drag their profits.

An ET analysis reveals that for every Rs 100 crore more an operator spends on buying airwaves over the reserve price its cost of hosting voice increases 0.8%-1.5% per minute, which will be built into pricing over the next three-five years.

The upcoming airwaves sale, that will start on March 4, will likely increase telecom operators’ costs by at least 10%, as per the ET analysis, but on recent evidence, it’s unlikely that they will pass it on to consumers anytime soon.

Competitive pressures on voice has already hurt revenues from the segment for leading players such as Vodafone India, Bharti Airtel and Idea Cellular over the last two quarters, say analysts. While Idea had cut voice rates in the second quarter ended September 30, 2014 which helped it sell the most SIM cards in the October-December period Airtel and Vodafone have been forced to keep tariffs steady to avoid losing users

“Since voice is declining, and there is no scope to change pricing (post auctions), it will be done in data,” said a top executive at a mid-sized telecom operator. Original post at ET Telecom

Wahengbam Rorrkychand

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Website: http://www.blog.tonsetelecom.com

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