Bharti Airtel hikes call tariffs – Will it be a New dawn for Indian Telecom landscape?


The 2008 Recession trickled-in with a whiff of nervousness affecting the domestic industry; and disappeared in a year showing signs of pick-up in demand. However, one sector that continued to be a laggard even post-recession was the great Indian telecom story traumatised by the cut-throat tariff competition.

Even as the economic recovery pushed-up Sensex from the lows of 8000 to 19000 levels, the ailing telecom sector continued to linger around its recessionary lows calling for a huge under-performance of cellular companies on the bourses.

And, rightly so, equity markets usually work on future earnings visibility and business prospects of a listed company. Until markets does not sense improvement in call tariff structures, continued subscriber addition and stable average revenues per user for the telecom companies; there is little probability that the prices of wireless firms will move up on a sustainable basis.

airtel new logo Airtel’s New Logo & Signature tune–Better or Worse?

Having said above, the much needed booster dose for cellular companies is almost here, in what could be the first major hike by any firm in three years. In latest, Bharti Airtel has raised pre-paid call tariffs by upto 20% in several circles of the country; a move that could well be followed other telcos soon.

More importantly, this move could well mark the end of an era fraught with eroding margins and falling ARPUs for the wireless firms. Bharti Airtel hiked mobile call rates under two pre-paid plans – Advantage and Freedom – for calls and messages within its own network; even as the call rates to other networks remain unchanged for now.

On one hand, Airtel is slashing tariffs to capture new subscribers and drive big volume growth business in the highly under-penetrated African markets in a bid to replicate its successful Indian model; while on the other hand the company is on its way to correct the depressed price-war scenario in the domestic market by way of tariff hikes.

New call rates are likely to benefit Bharti Airtel initially; and subsequently Reliance Communications and Idea Cellular as both the operators are expected to follow the suit going forward. Interestingly, Idea Cellular has emerged as the biggest beneficiary of the robust subscriber growth in the country over the last two years – which could pronounce into incremental revenues for the country’s fourth-largest telecom operator.

In a nutshell, the sector has reached a stage where the structural shift in pricing is imminent, sooner rather than later. Even if the subdued earnings trend in the telecom industry is not yet mature enough to reverse in a jiffy; one can comfortably say that the sector is up for a minor re-rating and ready to revert to its mean averages in terms of performance.

Will we see a new dawn for the Indian telecom landscape in terms of pricing?

PS.: We had recommended a strong ‘Buy’ on Bharti Airtel at Rs.290/- to our readers on April 30, 2010, based on its superior fundamentals. The stock has now surged to Rs.430/-, surging almost 50% in 15 months period. Then again, we had one more fresh buy call on December 31, 2010, as part of our Top 8 Stock Picks for 2011 at Rs.357/-

  1. Altaf Rahman says

    Even when it was a buyers market, when telcom operators are falling head over heals to steal customers, their complaint service was lousy. The staff are not trained to service the compalints.

    Now slowly with the realization that the bottom has been touched (in terms of call rates) and they got the guts to increase prices, we can dread the service in future.

  2. dpi says

    Even though they said ‘forced to revive the pricing’, Indian consumers are simply going to use double SIM’s. Keep sims like Airtel, Vodafone for incoming (for their vast network) with minimum recharges and select other cheap call rate SIM for outgoing calls.

  3. Ved Bias says

    hikes in call rates is necessty of ths.
    e teleom sector in india and very cleverly these operators have hiked the call rates in those circles where they are leading…. good move to retain the postion and profit.

  4. Mobile Locator Software says

    This step from Bharti will result into rise of call rates from other operators also. This means that the competition between the operators for lowest price will also decrease and finally the burden will come on the users.

Leave A Reply

Your email address will not be published.

who's online