Airtel says hike rates, but shuns first step
Telecom market leader Bharti Airtel today said the industry will need to raise tariffs as margins of operators are getting hurt at the current rate but ruled itself out to be the first to take the step.
"The current tariffs do not even cover marginal costs for most operators. So from an economics perspective, do we need to increase prices? The answer is yes," Bharti Airtel CEO (India and South Asia) Sanjay Kapoor said on the sidelines of the World Economic Forum on India here.
Competitive pressures have prevented telecom operators from hiking rates and are waiting to see who blinks the first.
Cautioning that the longer the decision on tariffs is delayed, the more harmful it will be for the industry, he said: "How long can this decision be delayed is anybody's guess. I think the more we delay these decisions, it will hurt the industry more."
When asked if Bharti Airtel would be the first to blink and take a price hike, Kapoor said: "We have been prudent and we will be prudent but in such a market, machoism doesn't help every time. I have shareholders to answer to, I need to sustain my market share at one end and profitability at the other end. I have to do that. It is (the) balance I need to keep doing."
Commenting on the impact of such a competitive market and inability to hike price, he said: "What is happening as a result of a move not being made is that it's a slow burn that is happening. You are seeing that every day. You have some operator closing down some circles. Ultimately it is leading to consolidation."
On whether a price hike could be expected in the near future in the telecom sector, Kapoor said: "Nobody can give you a timeline. The need for a price hike is more than accepted by me and by my colleagues in the industry."
Asked to comment on the upcoming 2G spectrum auction, he said there is not much attraction due to high reserve price of Rs 14,000 crore, although the industry as a whole is supportive of the auction process.
Kapoor said if the country is to be transformed from voice to data, then 5 MHz spectrum is not going to be enough.
"If you are an operator who wants to look at the long term prospects of the being in the industry, and to transform this nation from voice to data than the amount of spectrum to be put on table is not going to be 5 MHz, 10 MHz, 20MHz it will probably be 50-60-70 MHz," he said.
"That is the sort of spectrum required and if you are going to be buying that spectrum at these prices, where will be the business case?" he wondered.
