RComm to raise pan-India tariff by 25% in next 30 days

Below is the edited transcript of his interview to CNBC-TV18.

Q: Is the hike in tariff driven by the need for Reliance Communications to spruce up its P&L to reduce the leverage or is this foresight in seeing that competition is abating. Idea raise prices a couple of weeks ago in few circles. Is this sort of bottoming out of competition?

A: There are three reasons behind tariff hike. First, the current prices are unsustainable for a profitable growth. Second, there is clear evidence on ground of the competitive intensity coming down. Third, we are now hugely focused on improving average margin per user.

To support this, we implanted this hike in Bihar, Gujarat, MP and HP couple of weeks ago. We have seen no demand elasticity due to this price. So, we are encouraged to take this forward and we will be implementing this across the country over the next 30 days.

Q: On the GSM side, many of the players have offered a lot of these aggressive special tariff plans and similar things. You don’t see that stealing away some of your people who use your services. Is that not a threat for you? Or are you okay with losing some of the customers but you want better margins?

A: First of all, 1 paisa is a passé now. In October last year it moved up to 1.2 paisa per second. Here we are now staring at 1.5 paisa per second. We have seen no demand elasticity due to price hike in four regions. I am unable to comment on what competition will do, but we are very confident and bullish that these prices will get implemented and stay on ground and will have a positive impact on revenues and profitability.

Q: Do you see any impact on the number of subscribers because of this increase because 25% hike is not a small amount. Do you think the company may lose subscribers or there will be fewer incremental additions?

A: We have been adding subscribers in line with the industry growth and we do not see any adverse impact due to this price change.

Q: What about usage per customer? Would that trim?

A: Of the four circles where we implemented we have not seen any elasticity to consumption.

Q: Was that also 25%?

A: Yes.

Q: How do you expect this to impact revenues in the current year itself?

A: Telecom business is revenue accretive as we go forward. This will help improve revenue and profitability month on month as we go forward.

Q: As a key industry player by when do you think the competitive intensity, the intense one that we have seen could subside. There are estimates running on the street that by Q4 FY13 we will have a lot of this already bottomed out and prices will move higher. Do you see that taking it as long to start bottoming out or has the process already begun with you having raised prices by 25%?

A: The process has already begun as there is a kind of a virtual consolidation on ground. We do see consolidation in the future and tariff hikes can happen, another round in the next one year’s time.