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Will Telecom Tariffs in India see an Upward Trend from here on?

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India has one of the lowest tariff rates in the world. There was cut-throat competition among the companies and the rise of many small companies that gave lucrative offers and took a lot of customers from the bigger fishes. And of course, the mandatory 1p/1sec rate gave the consumers of all the telecom companies a standard cheap plan.

This was before…

These prices were so low that the companies were practically bleeding themselves in an attempt to gain users. Many things have changed since then. Be it the cancelling of licenses of some operators and thus reduction in the competition or the growing cost operations in the country, the companies have realized that they can’t continue with this.

Already the lowest plan has turned to 1.2p per second (that is 20 percent higher than what was generally available). Besides this, there is a general consolidation in the industry with now the companies focusing on improving their services and ARPU (Average Revenue per user) than trying to get more and more users.

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One reason for this is also that we have reached a point where the growth in number of consumers has stopped. This means that now the users can only be stolen from each other and the trick of getting more users is not the key to growth any more. Yes, rural growth is good, but revenues from rural user remain abysmally low as of now!

All things said, the bottom-line comes to this that the companies do not see reducing rates as a way to compete anymore. Reliance has increased its call rates by 20 percent recently. Airtel is reducing its offer buffet and other companies are also going to follow the suit.

Personally, I am not much affected by a slight increase in the call rates but my concern is that whether the services will improve in line with increase in tariffs. Because that will matter the most as the customer is also getting smarter and realizes that he would rather have better service than a lower cost. I am curious as to what will be the sweet spot for both the companies and consumers.

What is your opinion? Do you think that this is a smart move on the companies’ behalf or is it so necessary that they have no other option? Will your call reduce in minutes if the cost per call increase?

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