'Telecom companies likely to hike 2G rates to push 3G usage'

Tariffs for second-generation (2G) and third-generation (3G) data services are likely to converge over time as mobile phone companies could raise prices for 2G data offerings, having lowered 3G data prices in the recent past, a senior executive from Vodafone India said.

Mobile phone companies may adopt this strategy to propel first-time smartphone users to use 3G and push their existing 2G data users to experience faster speeds on 3G, say experts.

"We brought down 3G prices about four months ago and we expect that 2G and 3G prices are going to converge in the future," Vodafone India's Delhi circle head Subrat Padhi said.


However, companies may not be able to lower 3G rates further, Padhi said. He was speaking on the sidelines of an event to launch Vodafone's plans to promote 3G awareness among its own customer base and new smartphone users.

Vodafone said that only a fourth of its 160 million subscribers use smartphones, of which only half use 3G services. The company wants to increase this share of 3G users by making people aware that the technology gives better browsing experience and faster speeds. Top telcos, including Vodafone, had spent thousands of crores in buying 3G bandwidth through auctions in 2010, and had to price the services high to recoup the cost which proved unattractive to cost-sensitive subscribers in India.

Carriers thus have been forced to reduced tariffs of high-speed 3G plans significantly over the past couple of years. Leading telecom companies including Bharti AirtelBSE 0.35 %, Vodafone India and Idea slashed tariffs by over 70% in 2012 in order to boost usage. Since 3G usage has doubled year-on-year for the companies.


In contrast, telcos have raised tariffs for 2G data indicating that the industry is already moving in that direction. The last increase was done four months ago when discounts were cut in various circles and the amount of free data was lowered without touching headline tariffs.


Padhi added that initial signs of convergence were evident as differences between 2G and 3G tariffs had significantly reduced.