Hutch welcomes removal of floor rates; expects no price war

Hutch Sri Lanka, Sri Lanka’s third largest mobile operator following its merger with Etisalat Sri Lanka, on Wednesday said they welcome the recent move by the government and the telecom industry regulator to remove the floor rates on voice calls.

“I welcome the move by the regulator. We operate in a competitive open market. In principle I don’t agree or accept artificial conditions or limitations that obstruct our ability to develop,” Hutch Lanka CEO Thirukumar Nadarasa, said. 

The Telecommunication Regulatory Authority (TRC) in 2010 brought in floor rates for the first time to safeguard the industry when its viability was threatened by the intense price war among service providers, which led to price undercutting to grab market share from each other in a largely saturated mobile telephony market.

However, this measure only temporarily improved fortunes of the celcos as the rapid take off of cheap data services subsequently began to eat into their margins. TRC in 2016 scrapped the two rate structure for on-net and off-net voice calls and replaced it with a new common floor rate with effect from February 01, 2016. The mobile telecommunications industry in Sri Lanka is one of the most successful industries in the last 20 years. 
The light-touch approach adopted by the regulator, allowing the four foreign investors—Dialog, Airtel, Etisalat and Hutch—to develop the market in a competitive environment, resulted in Sri Lanka becoming of the countries with lowest call and data tariffs in the world.

Meanwhile, Nadarasa expects the more market stability with Hutch and Etisalat merger and said it is very unlikely that a price war could break out as some had pointed out following the removal of floor rates. 

“With the merger, there will be more market stability and we will be able to develop and grow the business instead of senseless price competition.
I’ve worked for Hutchison for over 20 years all over the world and I haven’t seen the Sri Lankan consumer complaining about tariffs. One GB for Rs.99.00 and a call at Rs.1.50 per minute—there isn’t any more room to go down.

Today, the consumer has been given three strong choices. Before that they had two strong choices and two weak choices,” Nadarasa said.