Balancing tariff hike + traffic growth

[admin]

The hikes in prepaid tariffs by the incumbents in 2H2011 found limited success with continued price arbitrage. While rev/min ticked up, minutes growth declined sharply, probably exacerbated by unfavorable macro backdrop (esp. high inflation). Going forward, operators are likely to balance rev/min and mins growth with focus on rev/market share. Expect only moderate competition with little risk of disruptive pricing given 1) high capacity utilization of incumbents and 2) new entrants facing business disruption.

[unifiedst]

I believe that the developments are positive and will facilitate tariff consolidation. We note that sector revenue per minute has improved by c3% since July, post the announcement of the tariff hike.

Bharti Airtel has announced tariff hikes across markets.

Vodafone and Idea Cellular have implemented tariff hikes selectively, particularly in their stronger circles.

Uninor raised base rate tariffs in selective circles.

This suggests there is an agreement in principle already in place and broader execution is on the cards. Don’t expect another round of tariff hikes, but rather a broader participation in the tariff hikes announced last year and upward adjustments in special value vouchers (SVV).