Telcos reduce promotional offers, prune free minutes

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SummaryMove follows recent 2G auction that saw exit of 7 new players

Bharti Airtel has raised tariffs on its prepaid services with other telecom operators expected to follow, ending years of declining charges for Indians as the companies fought a bruising war for market share.

The move by telecom operators to cut benefits on promotional offers was welcomed by brokerages and analysts. In a note Edelweiss noted this “will offset rising costs, although we do not expect headline tariffs to rise immediately”.

Market leader Bharti has reduced free minutes by 10 to 25 per cent and has increased price of payment vouchers in the range of Rs 5 to Rs 15. Idea Cellular is also believed to have withdrawn some of the promotional offers in various circles.

The current hike has been preceded by Airtel and Vodafone recently increasing 2G data tariffs by up to 30 per cent.

The roll back of benefits comes two months after a 2G auction in November which took out seven out of nine new players in the sector with only Videocon and Telewings, a unit of Telenor, staying in the fray. The companies will soon face another auction due in March to buy unsold spectrum in the costly circles of Mumbai, Delhi and Karnataka.

“The tariff war in the industry was started by non-serious players, who were here not for long-term, and their moving out will make the tariffs much more realistic and in accordance with the costs. Surely, a rise in tariff will help our bottomline,” said an industry insider. In the last one year the Edelweiss telecom index has slipped 24 per cent when the Nifty at the NSE has risen almost 20 per cent.

“Telecom tariff were not in accordance but the telecom companies could not raise it because of intense competition. This will impact their bottom line and the impact will be visible from the next quarter,” said Rikesh Parikh, vice president- markets strategy and equities, Motilal Oswal Securities.

He added that every one paisa increase in revenue per minute amongst the listed entities would an incremental impact of 10 per cent on RCom, 8 per cent on Idea and 4 per cent on Bharti.

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