Mobile tariff to rise every year, says Vodafone India CEO

Summary:India's second largest telecom operator Vodafone claims low tariffs no longer sustainable and says rates may have to rise every year.

There's been quite a revolution in telecommunications in India over the past few years, but the country's cheap mobile tariffs, claimed to be the world's lowest, are under threat says Vodafone India CEO Marten Pieters. India's approximately 600 million mobile phone users should expect call and other mobile service rates to increase as telco costs rise.

Pieters' comments echo those of Bharti Airtel, one of India's top four mobile service providers, which recently claimed current tariffs "are at absolutely unsustainable levels". 

The Vodafone boss claims current tariffs aren't sustainable when compared to general inflation figures. Interviewed by PTI, Pieters warns: "We have [had] lower tariffs for 18 years against inflation of 8-9 percent per year. Now, can you do that forever? No you can't".

The telco chief adds: "The point has come where lowest [tariffs] has been seen, we will have to increase our tariffs every year depending on cost levels”.  However, he does expect tariff increases will be within the overall inflation figure.

The telecommunications industry, like everyone else, has to increase prices, argues Pieters. In the last month the company reduced its bundles and effectivey increased 2G mobile internet rates by between 25 percent to 30 percent, together with two other players, Airtel and Idea Cellular. But it then slashed its rates by some 80 percent earlier this month.

Pieters explains that despite the tariff increase, Indian mobile services were still very affordable, and are contributing to the surge in mobile usage amongst youth and the general population. 

"India has still the lowest tariffs in the world. I think there is only one country which is coming close, which is China. The only difference being that in China, there are only three operators, they are very profitable and they invested last year US$55 billion in telecom infrastructure. We did US$5 billion, so what's better for the country?" he asked.

Pieters warns of a further hike in 2G mobile internet rates to the point where 2G data rates equate to 3G data rates.

He recalls 3G tariffs started out around six or seven times higher than 2G when the network launched, but the differential has decreased markedly. "It is now back to 1.5 to 1.6 times 2G data rates. Over time it 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 the customer anymore", Pieters said. 

Vodafone competitors Reliance Communications and Aircel take a different view, having reduced 3G mobile internet rates to bring them on par with 2G mobile internet rates. 

Some telecom operators have adopted other approaches to protect margins, such as increasing the rates of special tariff vouchers or reducing free minutes usage.

On a related topic, Pieters also said the industry will have to keep working work to create efficiency in the network to handle ever increasing loads. 

Topics: Telcos, India

About

Srinivas is an avid blogger and a technology enthusiast who has worked for a couple of digital/tech startups in India since 2010. He has also worked with a few technology clients dealing with tech startups in India and Asia-Pacific, giving him an insight on the country's startup space. In his spare time he listens to audiobooks, podcasts... Full Bio

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