Are Tariff Hikes The Only Answer?

With subscriber growth slowing and Average Revenue Per User (ARPU) levels dipping, it was always likely that India's operators would increase their tariffs again, and it seems that's going to happen soon, according to The Hindu Business Line. (See Mobile Growth Grinds to Near Halt.)

Vodafone India has kickstarted the second round of tariff hikes with a 20 percent increase on post-paid plans that offer per-second billing.

Such a move is perhaps understandable but also risky, as the service providers are caught in a difficult situation, as they need to boost their revenues while operating in a highly-competitive and price-sensitive environment.

With subscriber growth having slowed down, many of the operators are now focusing on winning a larger share of their users' wallets, with price rises a seemingly easy way to achieve this goal.

But it's uncertain that tariff hikes will positively affect ARPU levels. The last tariff hike in August 2011 didn't really lead to an ARPU increase for the operators. Instead, it lead to a drop in Minutes of Usage (MoU) for most of the operators. (See Mobile Operators Show Data Growth and Tariff Wars - Round 2.0.)

It's time for the operators to put on their thinking hats and formulate an alternative to tariff hikes to increase their ARPUs.

Gagandeep Kaur, Editor, Light Reading India