Hello, Your Mobile Bills will Bloat 30% this Year

After bleeding for long, telcos to go for bold tariff hikes

JOJI THOMAS PHILIP NEW DELHI

Mobile phone bills of consumers will rise 20-30% this year, top executives of all leading operators said, as the country’s debt-ridden telcos raise call tariffs to revive revenue growth and cut losses in the fiercely competitive sector.
The move follows the 20% increase last July, the first hike after operators slashed tariffs in 2008 as they chased new customers, but ended up eroding profits. It comes at a time telcos are staring at penalties and fines running into thousands of crores of rupees for a range of alleged violations.
Vodafone quietly raised tariffs of postpaid users in January by about 20% in Delhi and plans to extend this to other regions, with rivals set to follow suit this month. Telcos say tariffs for prepaid customers, who form 96% of users, will be raised after March.
An executive close to Bharti Airtel said a 20-30% rise in the next 12 months was the “minimum requirement for the industry to keep its head above water”. Even state-run BSNL, which did not raise rates last time, plans to increase tariffs, a top executive said.
An executive close to Reliance Communications said the industry needed higher charges to service its . 275,000-crore debt. “Except the top three, all operators are losing . 800-1,000 crore per quarter,” the executive said. Uninor Managing Director Sigve Brekke told ET recently if ‘incumbents increase tariffs, he would be the first to follow’, adding that customers could afford higher tariffs. India added 400 million users in the last two years, but revenues crawled 10%, and average minutes of usage per customer fell from 465 in 2007 to 350. “Inflation has been around 9% in the last two years. The industry paid . 70,000 crore for 3G spectrum. These services failed to take off and costs will eventually have to be passed on,” said the executive of a leading GSM operator. He said earnings from every minute of traffic had plummeted to 40-45 paise from . 1 in 2007.
Samaresh Parida, director, Vodafone, said government levies had raised costs. “If the government keeps on trying to extract more from us, we are left with no alternative.” DoT Issues Notices to 5 Telcos, Seeks 1,600 crore
The telecom department (DoT) on Tuesday issued showcause notices to five telcos — Bharti Airtel, Vodafone, Reliance Communications, Tata Teleservices and Idea Cellular — asking them to pay up about . 1,600 crore in total, for allegedly understating revenues and hence paying lower levies during 2006-07 and 2007-08. The notices were sent within hours of communications minister Kapil Sibal approving the DoT’s proposal to recover . 823.31 core towards unpaid levies during these two years. But the total payment for the industry is almost double this amount because the department has added spectrum usage charges and other levies on the alleged underreported revenues, in addition to imposing penalties and interest on outstanding.
Executives with telcos said all five operators were expected to seek relief from court. They also added that the DoT had misinterpreted accounting practices and standards when alleging that telcos had underreported revenues. On Monday, in a presentation to Sibal, the department said that these five operators together had understated revenues by . 10,268 crore during this two-year period. Since telcos pay 6-10% of their annual revenue as licence fee and 2-6% as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government.
ET had reported this development in Tuesday’s edition. It is estimated that RCOM will have to pay . 551 crore, while for Bharti it will be . 292 crore. The penalties for Vodafone works out to be . 254 crore. ET has learnt that Idea will pay . 113 crore, Tata Teleservices . 273 core and Tata Comm . 120 crore. Last year, the law ministry had approved the telecom department’s plans to issue showcause notices to telcos on this issue.