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In a bid to arrest low margins and profitability that is hurting the entire telecom industry, Bharti Airtel, India’s largest mobile service operator, has taken a bold move to hike call tariffs by 20 % in five of its leading circles.

The hikes announced on Friday, which are expected to have major implications on pricing in the highly competitive and cutthroat market, will be for its pre-paid subscribers in New Delhi, Gujarat, Madhya Pradesh, Kerala and Andhra Pradesh circles. Prepaid typically constitutes 95 % of the entire subscriber base.

Bharti Airtel’s move is likely to be followed by other large operators while the smaller ones may take a while before effecting a similar hike.

The increase in tariff will be for Airtel’s per minute billing plan—Advantage—as well as for the per-second Freedom packs. The changes will be implemented on calls and SMS rates within the Airtel network even as tariffs remain unchanged for calls and text messages sent from Airtel to other operators. Subscribers of the Advantage pack will now pay 60 paise instead of 50 paise per minute for local and STD calls and 90 paise for calls to landlines.

The first salvo on the crucial issue of pricing for the industry reeling under low margins and low profitability was fired by Tata DoCoMo. Tata DoCoMo, the GSM brand of Tata Teleservices, announced that new subscribers joining its network from June 16, 2011 will have to pay higher rates for STD (long distance) calls after one year of activation and it also increased SMS rates.

While Vodafone did not comment on whether it will follow suit and hike call rates, the operator said in a statement declaring its financial results, “While competition in the market remains high, the effective rate per minute is stabilizing as a result of a focus on promotional offers rather than further ongoing price reductions.”

An Airtel spokesperson said, “Telecom is probably the only industry where despite increasing inflation, tariffs have been falling unabatedly. Continuously declining margins, high 3G and BWA auction prices, constrained spectrum and rural rollout aspirations leave us with little choice but to make some price corrections.”

Industry players and analysts that TOI spoke to said this “bold” move by Airtel was intended to address declining profitability as well convey a message to other operators to correct course. An executive from a leading mobile operator said, “This is an opportunity for the newer operators who are bleeding to correct their rates. What Airtel wants to convey through this test move is that it can command premium over these newer operators as they have not really made a dent in the three years of existence.”

Telecom analysts also said the move was restricted to a few circles at the moment in order to gauge the consumer sentiment. “This hike may not pave way for instant revival of quarter-on-quarter profit numbers but if the consumer sentiment is positive and they do not churn too much, the operator is expected to roll it out across the country,” said Romal Shetty, consultancy firm KPMG’s telecom head.

Rajiv Bawa, chief corporate affairs officer, Uninor, “As a smaller player competing against established brands, Uninor will have to remain very attractive to its trade and customers. However, we will watch this move by the industry leader carefully to see the actual changes on the ground. We will support rationality in the industry in a manner that mobile services continue to remain affordable for customers.”