Reliance Comm cuts call charges to flat rate

MUMBAI: Reliance Communications, India's No. 2 mobile operator, on Monday reduced all call tariffs to a flat 50 paise (1 U.S. cent) per minute, heating up a tariff war in the world's fastest-growing wireless market that offers some of the cheapest call rates. (Watch)

Reliance's move comes after larger rival Bharti Airtel last month said it would charge 50 paise a minute for local and national long-distance calls within its own network. Reliance's pricing would be for calls across networks, it said.

Local call rates in India now average U.S. 2 cents per minute, and national long-distance calls are priced at about U.S. 3 cents, with variations depending on bill plans and operators.

Lower tariffs have led to record sign ups for operators, but their revenue and profitability have started taking a hit.

Average Revenue Per User (ARPU), a key gauge of profitability, continues to decline, though operators are betting on increase in call volumes from reduced tariffs to make up for the revenue loss.

"There will be a usage stimulation, and in 45 days we will come back to the ARPU we currently enjoy," Nilanjan Mukherjee, chief marketing officer of Reliance Communications, told reporters at a news conference on Monday.