* Cutting free minutes, increasing call voucher prices -
* Idea Cellular also lifts prices, others seen following
* Vodafone's India unit says inclined to follow
* Bharti shares climb 4.5 pct
By Devidutta Tripathy
NEW DELHI, Jan 23 (Reuters) - Bharti Airtel,
India's top mobile network operator, has increased voice call
prices to meet rising costs, boosting its share price and
prompting rival Vodafone to consider following suit.
The market of nearly 900 million customers, the world's
biggest after China, has not seen a sustained increase in call
charges for three years after a price war sent rates tumbling in
Idea Cellular, India's No.4 operator by customers,
said on Wednesday that it had effectively raised prices for
voice calls in some parts of the country after withdrawing
Vodafone's Indian unit, the country's second-biggest mobile
carrier, said it was inclined to follow price moves by its
competitors but had not decided on precise steps.
The price increases come as mobile network operators in
India face billions of dollars in airwave surcharges after the
government overhauled its system for the sale of airwave
spectrum. The shake-up was in response to a scandal that broke
in 2011 over an alleged below-market-price sale of permits and
airwaves three years before.
The government will sell airwaves through open bidding in
March, four months after the first such auction, with the
minimum bid price at both auctions more than six times the
previous fees set by the government.
"Part of the tariff hike is driven by cost pressures and
also it is sort of a pre-emptive move in order to improve
financials because we have a major auction coming up," Nirmal
Bang analyst Harit Shah said.
Shah expects moderate increases in future prices, which
could put pressure on call volumes. "(With) India being a
price-sensitive market, I don't think you should assume (there
will be) no impact on usage," he said.
There is no certainty that the new rates will stick.
Operators dialled back a 2011 increase when they lost market
Bharti Airtel, nearly 33 percent-owned by SingTel,
said in a statement that it did not increase headline tariffs
but reduced promotional benefits and free minutes offered to
customers. The price change was in line with the increase in its
costs, Bharti added.
While the latest move to increase prices may not be
sufficient to reverse declining profit at Bharti Airtel, it is
at least a sign of things to come as companies struggle with
higher regulatory fees and other costs, analysts said.
Bharti's move sent Indian telecoms shares higher as
investors bet that rivals will follow the market leader.
Shares in Bharti Airtel closed 4.5 percent higher. Idea rose
4 percent and Reliance Communications gained as much
as 3 percent, though both pared most of those gains.
CUTTING FREE MINUTES
A source familiar with the matter told Reuters that Bharti
Airtel is reducing free minutes by up to a quarter and has
increased prices of some call vouchers for prepaid customers by
5-15 rupees (10 to 30 cents).
The price increase will be extended to all of India's 22
telecommunications zones in phases, the source said, declining
to be identified because the information was confidential.
"With the largest player raising prices, we expect other
players to follow suit," brokerage Edelweiss Securities said.
Reliance Communications, the country's third-biggest carrier
by customers, raised some voice call prices in September. A
company spokesman did not offer any immediate comment when asked
if they were planning a further increase.
Voice calls account for about 85 percent of revenue for
India's mobile network operators, with mobile data still at a
nascent stage. However, call rates are among the lowest in the
world, often less than 1 cent per minute, squeezing the
companies' profit margins.
The good news for the companies is that competition in a
market once crowded with 15 players is easing after several
smaller operators folded or cut back operations after a Supreme
Court order last year to revoke their permits.
But the market still has seven national operators, a large
number by global standards, and more could emerge as the
government gears up for its airwave auctions.