Telecom prices bound to rise, warns Vodafone India chief

Vodafone, India's second-largest telecom operator, said on Sunday that it expects call and other mobile service rates to go up every year, indicating that the days of low tariff may be numbered.

India has perhaps the lowest mobile call and message rates in the world, but this seems likely to change after rising spectrum prices in the wake of a Supreme Court indictment on the way radio wave-bands were was sold earlier.

"We have had low tariffs for 18 years against inflation of 8-9 per cent a year. Now, can you do that forever? No you can't," Vodafone India managing director and chief executive officer Marten Pieters said in an interview with news agency PTI.

"So the point has come where lowest has been seen, we will have to increase our tariffs every year depending on cost levels," he added.

He said that like everyone else, the telecom industry too has to increase the prices.

Last month the company increased 2G mobile internet rates by up to 30 per cent, along with Bharti Airtel and Idea Cellular.

Peiters said that going forward 2G data rates and 3G data rates will be at similar levels - indicating a further hike in 2G mobile Internet rates.

"We started 6-7 times high tariff rate when we opened up 3G network. It is now back to 1.5 to 1.6 times of 2G data rates. It over time will come together. But it can't come over time just by lowering 3G tariff; it needs to also see increase of 2G tariffs. Once it is equal, it doesn't matter to customer anymore," Pieters said.

Vodafone's competitors such as Reliance Communications and Aircel have meanwhile reduced 3G mobile internet rates to bring them on par with 2G mobile internet rates.

Pieters said that industry will have to work to create efficiency in the network to handle increasing load.

"My assumption is that our price increase will always be lower than inflation but you can't of course forever keep lowering your prices, it's impossible," he said.

In a bid to remain profitable, leading telecom operators have increased rates of special tariff vouchers and reduced free minutes usage.

Airtel too said recently that the current tariffs in the country "are at absolutely unsustainable levels".

Pieters said that despite the tariff hikes India still has the lowest tariffs in the world. "I think there is only one country which is coming closer, which is China. The only difference is that in China, there are only three operators, they are very profitable and they invested $55 billion last year in telecom infrastructure. So what's better for the country?" he asked.