Tariff hike: New telcos wait and watch

New entrants to the telecom sector might not jump on the bandwagon by going for tariff hikes like the big three — Bharti Airtel, Vodafone and Idea Cellular. Instead, they have decided to wait and watch, to see the effect of these increases on the industry.

As trade pundits predicted, tariff hikes are going to be slow and steady unlike the domino effect caused in 2009, when even established operators went into a frenzy and slashed tariffs to hold back subscribers. This time around, newer operators who took the lead in tariff cuts, will watch the effect of tariff hikes by established players like Bharti, which increased went in for 20 per cent tariff hikes in select circles.

“We will see what these tariff hikes mean on the ground. In this case, we will wait for industry leaders to show us the way,” said Rajiv Bawa, executive vice-president (corporate affairs), Uninor.

Another aggressive new entrant said it would watch the effect of the tariff hikes on churn, and then take a call. “Bharti had gone for tariff hikes in circles in which they already have a leadership position. Eventually, tariff hikes might happen but not immediately,” said an official under the condition of anonymity.

Though they do not intend to go for tariff hikes immediately, the new operators are certainly cheering the move. “This shows rationalisation is coming back to the market. And all of us will benefit from it,” said Bawa.

Analysts, however, doubt tariff hikes would bring in more revenues for the new operators.

“The new operators find themselves in a difficult position now. If they were to increase tariffs, they risk losing subscribers to the larger operators which offer a better variety of applications and services, including 3G,” said Kamlesh Bhatia, research director, Gartner.

Sector experts feel it could also be a long time before these new operators, who entered the market with innovation via rock-bottom pricing, can reverse their strategy. Agrees a new operator. “Our unique selling proposition is competitive tariffs,” he said.

Bawa, too, said they would always offer affordable tariffs, but refused to specify.