Govt looking to set floor price for mobile tariffs

At a time when the tariff wars in the telecom industry have eroded the earnings of top firms, a proposal to draw a floor price for future tariff offerings by telcos is being given a serious consideration in policy circles.

"There is a view to cap the lower end of the mobile phone tariffs to ensure that the telcos do not bleed due to the price war in the industry. The need for a lower limit is being discussed as a measure to control the tariff war due to a large number of telecom companies in the market," said a government official in the know.

He further said that the Telecom Regulatory Authority of India (Trai), the sector regulator, is also believed to be discussing the proposal of capping lower-end of the tariff.

Excessive competition in the industry has led to a tariff war impacting the revenues and the balance sheet of various operators.

Industry leader Bharti Airtel has seen its profit decline from Rs 1,574 crore in the last quarter of 2011-12 to Rs 1,470 crore in the first quarter of 2012-13.

Likewise, Reliance Communications made a loss of Rs 252 crore in the first quarter of the current fiscal down from a profit of Rs 804 crore in the last quarter of 2011-12.

Idea Cellular saw a marginal decline in its first quarter profit during the first quarter of the fiscal to Rs 189.96 crore from Rs 189.98 crore in the fourth quarter of 2011-12.

Tata Teleservices' losses increased in the first quarter of the current fiscal to Rs 162 crore from Rs 123 crore during the fourth quarter of the last fiscal.

Industry executives say that the tariff war is immense due to the competition created by a large number of new players entering the sector. They also say that the competition has been intensified after Mobile Number Portability (MNP) was kicked off.

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