A quick analysis of publicly available financials of mid-size players, viz., Tata DoCoMo and Aircel group indicate that they would require to hike prices by 10-15% just to service the Interest Cost. Though the cash burn has been funded by debt so far, the lack of equity financing leaves them with no alternative but to support the new round of price hikes. It is important to note that the tariff hikes led by incumbents (primarily Airtel) in mid-2011 failed partially because of the lack of follow up from challengers, i.e., Tata Docomo, Aircel and even Idea.
Support from mid-size players will be critical for the sustenance of pricing discipline. Not only is there a strong case for that to happen now, but anecdotal evidence at the ground level also suggests the same. Although the bonus schemes have also been progressively tightened from August 2012 onwards, it is difficult to monitor given the multitude of schemes. There is also now growing evidence of actual tariff changes/bonus card tightening by them at the ground level.