Temptation to hike phone tariff

New Delhi, Feb. 2: Incumbent operators including Bharti Airtel and Vodafone are likely to be tempted to weigh tariff increases as the Supreme Court's decision to cancel telecom licences of new entrants reduces subscribers' choice of service providers.

Some analysts said operators may also pass on to customers the cost of buying additional 2G spectrum at market prices. "Large operators are facing high pressures on their margins and are likely to go in for a price hike in an environment where competition is limited," Ashish Basil, a telecom expert at consultant Ernst and Young, said.

As part of its order, the Supreme Court asked the government to auction 2G spectrum in the next four months. Under the new telecom policy, too, licence and spectrum have been de-linked and spectrum is to be sold through auctions.

But despite fears of higher charges, some factors could prevent or limit the bite. "Tariffs will never be increased to a level where the usage falls," said Basil.

Also, Trai is in the process of amending the "tariff forbearance policy", under which they do not need to seek the telecom regulator's approval for rate hikes.

The changes may stop operators from raising tariffs beyond a point. Trai chairman J.S. Sarma hinted as much when he said the policy on forbearance could be reviewed if tariffs go up too sharply.

While the existing operators will benefit from any customer churn caused by the exit of firms because of today's order, some experts sought to calm fears of a turmoil. They pointed out that operators who have lost their licences account for only 5 to 7 per cent of the total market, which is not a "substantial number".

While Uninor has the largest subscriber base of 36 million ' 4 per cent of the market ' Russian operator MTS has 15 million (1.68 per cent). The rest of the seven operators together have 20 million subscribers.

Bharti Airtel, Vodafone and Idea Cellular raised tariffs last July, resulting in an increase in revenues in the quarter ended September. But this also prompted users to pull back, leading to a drop in volumes.

"Learning from that move, operators will be cautious in increasing call rates, but with fewer players around, they will look at boosting revenue growth through hikes," said an executive from a leading telecom player.

So, while many of the country's over 900 million mobile customers fear higher bills as a possible fallout of today's licence cancellations, the 70 million subscribers of the new operators who lost their permits will have to look for another service provider.

Sarma, the Trai chairman, said that with number portability available to customers, finding another service provider within the next four months should not be a problem.

Sarma said new guidelines would be issued for those who have been customers for less than 90 days, for whom the portability option is not open.