Reliance Communications has hiked prices of some of its special tariff vouchers (STV) significantly (over 20%). For example, a STV of Rs46 is now offering 140minutes of on-net minutes vs. 200minutes earlier. This is the second major tariff hike by RCom in the last 6 months. Earlier, in Sep’12 RCom increased the base tariff of its per second plan by 25% (from 1.2p/sec to 1.5p/sec).
RCom’s recent hike is in-line with our view that voice RPM is likely to move up in the next 2-3 years. RCom and Tata DoCoMo were the initial few operators to create price disruption in the sector. Rational behaviour of RCom and Tata DoCoMo coupled with pull back of Telenor, Aircel, and Videocon from several service areas is likely to lead to better pricing, in our view.
We expect rationalization of discounted/free minutes to happen first followed by hikes in base tariffs. Based on our analysis, rationalization of discounted minutes is likely to increase voice RPM by 20%.