Cellular operators, subscribers may soon end their honeymoon

Ahmedabad: The honeymoon between cellular subscribers and cellular operators may soon be over with the latter thinking in terms of raising call rates to more realistic levels. "The industry might come a full circle, though the tariffs cannot go up beyond a point," says an industry expert.

While most cellular operators are witnessing increasing volumes, margins are a serious cause of worry. Cellphone companies argue that the cost of producing one minute of talk time is higher than selling it today. As a matter of fact, the rates in India are among the cheapest in the world. In the US, for instance, the minimum commitment plan from a user is $50 a month.

In this scenario, mobile operators will begin to look for opportunities to hike tariffs, with the other revenue stream being data services. In fact, even the short messaging service (SMS) segment, supplemented by some value-added products, is being seen as a target for future price hikes.

Hutch, for instance, has already hiked the cost of an inter-state SMS by Re 1. "The growing number of consumers does not always spell better bottomlines for cellular service providers. The ARPU [average revenue per user] for the operators is likely to gradually dip," say industry observers.

Bharti Enterprises chairman and group managing director Sunil Mittal says while the cost of voice is cheapest now, cellular companies may look to increase revenues from value-added services. "The cost of voice is rock bottom and I believe people will be willing to shell out more for VAS [value-added services]."

Besides, cellular tariffs are bound to rise in the wake of termination charges being introduced for SMS. Similarly, SMS carriage charges and network charges too could be levied in future, making SMS a costlier proposition. Mittal says the industry has to make reasonable returns and with investments to the tune of Rs 11,000 crore, a 15-20 per cent return is reasonable.

Bharti Mobile CEO for Karnataka and Andhra Pradesh Jagdish Kini says the frenetic pace of growth in user numbers observed in the industry will be sustained for at least two years before it starts to plateau. Others place the upper limit for rapid volume growth at five years. It is estimated that the mobile phone user population will nearly triple (from 17 million to 50 million) before the numbers stabilise.

Cellular companies also express fears about Telecom Regulatory Authority of India's (TRAI) intervention on the price front, thus interfering with the market forces. Observers, however, feel that TRAI should leave the industry to fend for itself and should only be concerned about issues like unnecessary fleecing of customers and predatory pricing.