Telecom operator Reliance Communications (RCOM) has hiked its cellular calling rates by 25%, reports The Economic Times. The report states that this is the biggest hike by the telco ever and the hike was implemented to improve the company’s operating margins.
According to the report, RCOM has increased the base tariff to Rs 0.015 paisa per second from Rs 0.012 paisa per second, for four states including Bihar, Madhya Pradesh, Gujarat and Himachal Pradesh and it plans to extend this price hike to rest of the country in the next 30 days. The report also adds that the revised rates will initially apply to RCOM’s new subscribers but it will soon be rolled out to existing customers once the validity of their tariff plans expire.
Additional Price Hikes in Future: Further, Gurdeep Singh, CEO of RCOM’s wireless division also hinted at further price hikes in the future, stating that the intensity of competition in the telecom sector has reduced significantly in the country. He also noted that this hike was in line with their strategy to focus on growing its paid usage minutes and this price hike will reflect on its revenues for the next financial year, since the validity of 8-9% of its user base expires every month.
This follows a reduction of 20.48 million RCOM connections in July 2012, due to the disconnection of inactive subscribers who had not used the connections for two months, taking the telco’s total connection base to 134.11 million. The company had previously increased its tariffs from Rs 0.01 paisa per second to Rs 0.012 paisa per second in August 2011.
We wonder if this announcement will pave the way for other telcos to announce similar hikes for its subscribers. While Airtel and Vodafone refused to comment whether they plan to introduce similar hikes, Idea had hiked its prepaid tariff by 20% in Madhya Pradesh earlier this month.
Financials: Reliance Communications had reported a total revenue of Rs 5319 crore for the quarter ended June 30th 2012, up 8% year-on-year (YoY) and a net profit of Rs 162 crore, up 3% YoY. The company’s wireless division posted a net revenue of Rs 3,416 crore, up 17.85% YoY and EBITDA of Rs 1209 crore, up 5.25% YoY.
RCOM also claimed to have 4 million 3G customers and over 24 million data customers for the quarter and claimed to have the highest wireless revenue per minute in the industry at 43 paise per minute.
TRAI Drops Port Charges: In a related development, TRAI has dropped the port charges by 90% to Rs 4,000 per port per year from the existing Rs 39,000 per port per year for mobile networks and Rs 10,000 per port per year for fixed line networks.
Port charges are essentially the charges paid by operators who are transferring outgoing calls to the operators who are receiving these calls, to make the transfer. TRAI stated that these revised charges will come into effect from October 1, 2012. however it is yet to be seen if this price drop will have any effect on the call tariff offered by telcos in the country.