Airtel slashes roaming rates by 60% to 60p

Intensifying the tariff war, the country's largest telecom operator, Bharti Airtel (BHARTIARTL.BO : 317 +3.2), on Friday slashed the roaming rates by 60% to 60 paise per minute, thus becoming the second operator after Reliance Communications (RCOM.NS : 169.35 +1.2) to do so. Analysts say that other operators will follow suit soon.

The move assumes significance, as telecom operators are already engaged in tariff wars and with the market leader now drastically reducing the roaming charges, others will be left with no choice but to replicate the move. Though, when contacted, none of the operators confirmed a possible cut in roaming charges in near future, officials of telecom companies told FE that a similar tariff cut is likely to take place soon.

In a typical reaction to the cut, Bharti Airtel's shares fell 1.40% to close at Rs 288.75.

Until now, Airtel was among the last operators to reduce tariffs, but analysts say that this move has ensured that the market leader has taken the battle to its home ground, as it has the largest subscriber base at 115 million.

Industry experts expect the tariff war to continue until the new licensees, such as Etisalat DB and Telenor-controlled Unitech Wireless launch their operations.

"Roaming charges typically constitute up to 10% of a telecom operator's revenue. However, the margin on roaming is very high compared to local calls. So, roaming is one of the most profitable revenue streams. This is clearly a move to retain high-value customers and attract more of such subscribers", Romal Shetty of KPMG said.

But industry experts say that it remains to be seen if the move will actually help the operator arrest its sharply declining average revenue per user. "Reducing the roaming charge will definitely reduce the margin per customer on roaming but it might help by increasing the volume of users and hence turn from a value to a volume game", Shetty said. "Ever since Tata DoCoMo launched the per second billing, the company has been adding 4.5 million subscribers each month on an average, while the Bharti

Airtel, which is the country's largest telecom operator, has been adding close to 2.5 million. This increases the sense of urgency to come out more aggressively".