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* Cutting free minutes, increasing call voucher prices -source
* Idea Cellular also lifts prices, others seen following
* Vodafone's India unit says inclined to follow
* Bharti shares climb 4.5 pct
By Devidutta Tripathy
NEW DELHI, Jan 23 (Reuters) - Bharti Airtel,India's top mobile network operator, has increased voice callprices to meet rising costs, boosting its share price andprompting rival Vodafone to consider following suit.
The market of nearly 900 million customers, the world'sbiggest after China, has not seen a sustained increase in callcharges for three years after a price war sent rates tumbling in2009.
Idea Cellular, India's No.4 operator by customers,said on Wednesday that it had effectively raised prices forvoice calls in some parts of the country after withdrawingpromotional offers.
Vodafone's Indian unit, the country's second-biggest mobilecarrier, said it was inclined to follow price moves by itscompetitors but had not decided on precise steps.
The price increases come as mobile network operators inIndia face billions of dollars in airwave surcharges after thegovernment overhauled its system for the sale of airwavespectrum. The shake-up was in response to a scandal that brokein 2011 over an alleged below-market-price sale of permits andairwaves three years before.
The government will sell airwaves through open bidding inMarch, four months after the first such auction, with theminimum bid price at both auctions more than six times theprevious fees set by the government.
COST PRESSURES
"Part of the tariff hike is driven by cost pressures andalso it is sort of a pre-emptive move in order to improvefinancials because we have a major auction coming up," NirmalBang analyst Harit Shah said.
Shah expects moderate increases in future prices, whichcould put pressure on call volumes. "(With) India being aprice-sensitive market, I don't think you should assume (therewill be) no impact on usage," he said.
There is no certainty that the new rates will stick.Operators dialled back a 2011 increase when they lost marketshare.
Bharti Airtel, nearly 33 percent-owned by SingTel,said in a statement that it did not increase headline tariffsbut reduced promotional benefits and free minutes offered tocustomers. The price change was in line with the increase in itscosts, Bharti added.
While the latest move to increase prices may not besufficient to reverse declining profit at Bharti Airtel, it isat least a sign of things to come as companies struggle withhigher regulatory fees and other costs, analysts said.
Bharti's move sent Indian telecoms shares higher asinvestors bet that rivals will follow the market leader.
Shares in Bharti Airtel closed 4.5 percent higher. Idea rose4 percent and Reliance Communications gained as muchas 3 percent, though both pared most of those gains.
CUTTING FREE MINUTES
A source familiar with the matter told Reuters that BhartiAirtel is reducing free minutes by up to a quarter and hasincreased prices of some call vouchers for prepaid customers by5-15 rupees (10 to 30 cents).
The price increase will be extended to all of India's 22telecommunications zones in phases, the source said, decliningto be identified because the information was confidential.
"With the largest player raising prices, we expect otherplayers to follow suit," brokerage Edelweiss Securities said.
Reliance Communications, the country's third-biggest carrierby customers, raised some voice call prices in September. Acompany spokesman did not offer any immediate comment when askedif they were planning a further increase.
Voice calls account for about 85 percent of revenue forIndia's mobile network operators, with mobile data still at anascent stage. However, call rates are among the lowest in theworld, often less than 1 cent per minute, squeezing thecompanies' profit margins.
The good news for the companies is that competition in amarket once crowded with 15 players is easing after severalsmaller operators folded or cut back operations after a SupremeCourt order last year to revoke their permits.
But the market still has seven national operators, a largenumber by global standards, and more could emerge as thegovernment gears up for its airwave auctions.
