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Reliance Communications hike call rates by 20 %

Mumbai, Sep 21 () : Mobile call rates for new subscribers with Reliance Communications would be increased by 25%. This could trigger  a fresh round of call rate increase by other mobile companies, feels the telecom sector.

Reliance Communications, which is deeply in red, disconnected around 21 million connections since they were not in use for past two months. After Bharti Airtel, Reliance Communications is the second biggest mobile operator which hopes to improve its operating margins.

This move by Reliance Communications to hike the tariff is seen as a risky move since rivals might not follow suit and with number portability the subscriber base could shift to other operators.

Only those subscribers who are new and those whose plans will expire will be affected said the company. The present call rate for prepaid customer is 0.1 paise per second will now be 0.3 paise per second. This tariff will be implemented as test case in four States after which it will be put forth in other areas. The aim is to track the user average margin of profit on a daily basis instead of looking at the monthly revenue from the subscriber.

Rivals Airtel and Vodafone did not comment about Reliance Communication’s new tariff but going by previous history, the other companies have followed suit. Now, the competition from mobile companies has more or less levelled and a price war that existed in the the three years till 2011 is not on any more. After this ended, the mobile operators raised rates by 20%. Recently Madhya Pradesh Idea Cellular increased rates by 20%.

Mobile operators point out that every month around 8% of the subscribers of Reliance Communications have their existing plans expiring and the revenue increase can be gauged only in the next fiscal. Yet another reason is that these hikes are often offset by some plans announced for festive season and the subscribers shift to them.

Reliance Communication claims that it studied the market for six months before increasing the rates saying its subscriber base would not shift. Bharti Airtel whose profits are dipping might offer competitive plan to woo Reliance Communication subscribers. Even if the revenue were to increase for Reliance Communication, around 35% would go towards operational costs says analysts. Hearing about this rate hike, Reliance Communications share value went up.