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Bharti Airtel, Vodafone India raise 2G data rates to improve margins

[UPDATE] Airtel has raised the prices of its 2G data plans by 25 percent to stay afloat in the telecoms industry, and Vodafone then followed suit and raised prices of its monthly plans by 30 percent.
Written by Ellyne Phneah, Contributor

Bharti Airtel and Vodafone India have both increased 2G data rates in a bid to cover costs and improve profit margins, and its rivals Vodafone and Idea Cellular are expected to do the same.

According to The Economic Times on Wednesday, India's largest telco has been cutting down on freebies to its customers, and increased the price of its 1 GB 2G data plan by 25 percent. Customers of Airtel will now have to pay INR 125 (US$2.27) for 1GB of data, which had been INR 100 (US$1.82) before the price hike.

Bharti Airtel said the latest revision, subject to "rate elasticity, customer demand and supporting cost structures", echoed its CEO of India and South Asia, Sanjay Kapoor's recent asserting both pricing of voice and non-voice services must increase for the telecom industry to be sustainable, invest in future technologies and generate returns for its shareholders.

"The current tariffs do not even cover marginal costs for most operators. So from an economics perspective, do we need to increase prices? The answer is yes," Kapoor had said previously.

When approached by Indian news site, Airtel did not respond if they would also raise call tariffs and high-end data prices (3G) in the weeks ahead. The present increase in 2G data rates is restricted to only the 1GB data plan, which is the most expensive among the six 2G data plans it offers.

Vodafone too, has made similar changes in its monthly plans and reduced data limits available under various prepaid plans, a separate report in The Times of India, noted. Its INR 95 (US$1.73) had increased to INR 124 (US$2.26), while plans which allow 250 MB and 150 MB of data usage have been reduced to 150 MB and 100 MB, respectively.

A spokesperson from Airtel's rival Vodafone said, "We are aware of some of our competitors increasing tariffs for 2G data recently. We see this as an encouraging step for industry and are taking corrective measures accordingly at our end." However, details of these measures were not divulged.

Idea Cellular did not reply to The Economic Times' responses. However, industry executives aware of the company's moves, said it was planning to increase its 2G data rates following Airtel's move, the report noted.

This is the latest in Airtel's measures to cut costs. In October last year, Airtel was reportedly mulling merging its domestic and loss-making Africa business operations into a single business entity under a global CEO by the middle of this year, its most significant restructuring exercise to combine business synergies across geographies.

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