RCom raises call rates up to 20%

This is for pre-paid customers, who account for a major chunk of the company's 117 million subscribers

Reliance Communications on Wednesday announced a rise of up to 20 per cent in call rates for pre-paid customers, who account for a major chunk of the company’s 117 million subscribers.

While headline rates will rise seven per cent— from 1.5 paise a second to 1.6 paise a second — rates on discounted plans will rise 20 per cent. The changes will come into effect on April 25.

Gurdeep Singh, chief executive of Reliance Communications’ consumer business, said, “The current rate rises are part of our continued efforts to reduce free and discounted minutes and offset the ever-rising costs of input materials. We expect revenue per minute to improve through the next few quarters and this will impact our performance positively,” he said.

In a results preview for the quarter ended March, Motilal Oswal had estimated a one per cent rise in Reliance Communications’ revenue per minute at 44 paise.

The other top players in the market like Bharti and Vodafone too have been speaking of tariff hikes on the voice side. Bharti Airtel too had said that tariffs are likely to go up in the next few years, due to rising costs of running operations. 

"We will have to make more investments in infrastructure. Growing mobile internet also requires more investments in (optic) fibre. There is no other way but for rates to go up," said Gopal Vittal, managing director of Bharti Airtel said last month at a conference. Vodafone recently changed the structure of some of its post-paid bills, and communicated to its subscribers that their call rates would go up by 20%.

However, the latest hike in headline tariffs by RCom is unlikely to see any similar moves by operators, with tariff hikes, says a top official from Idea. "We will continue to move and respond to competitive changes but we see no immediate headline tariff change. We have strong leadership in some circles and we are growing in some, so our tariffs are really different," he said. 

Reliance Communications player which offers both CDMA as well as GSM services, has been under the cloud of a large number of free minutes which were being used by their subscribers. In the last few years, it has been gradually trying to reduce their exposure. 

The operator also went through three rounds of subscriber clean-up. In November last year, it deactivated the accounts of 10 million subscribers. It said that these subscribers were unprofitable and have not used their numbers for the last two months. This move made the operator slip in its ranking from being the third largest operator to the fourth largest, after Bharti Airtel, Vodafone and Idea Cellular.

RCom's stock went down by 2.6% in today's trade to close at around Rs 130, as per data available on the Bombay Stock Exchange.