The average Indian consumer is facing an enormous financial crunch over the last year, continuously bombarded by the aftermath of incompetent political decisions, inflation across all sectors, hikes in fuel, food, clothing and power prices despite disruptive supply, especially in the case of power.  Right at the time when the entire country was optimistic about the progress made by the telecom sector in wireless communications that served to connect the remotest of villages with the rest of India, that too at affordable service rates, a neat blow in terms of service tax has now been delivered. Service tax has hit almost all industries right from basic services that affect the common man to the luxury services availed by a privileged few.

Mobile users will now have to shell out an additional 2% in terms of service tax, which was at 10% prior to the Budget.  This applies to both pre and post paid plans, but a recent request on the part of telecom operators to increase the top-up charges by Re. 1/- from 2 to 3 rupees is bound to translate as an additional burden on the users of pre-paid plans. Recent hike in tariffs have already taken their toll on the monthly mobile bills of the middle and lower income groups who have come to rely on mobile phones for their daily communication requirements.  The sector sure is exhibiting the behavior inherent of profit making ventures that initially woo clients with abundant offers and low charges and then build on the pricing, once a loyal subscriber base is in place. Profit making is the second nature of businesses, but is there an alternative to make up for telecom infrastructure, licensing and operating costs instead of taxing the common man?

TRAI has however proposed moderately priced combo re-charge vouchers to bundle multiple features along with a single re-charge so that the subscriber is saved the cost of purchasing a separate voucher for each feature. TRAI on its part is also to trying to cap tariff hikes to protect the consumer even as telecom operators continue to plan on future hikes to manage operating costs. Telecom operator bodies COAI and AUSPI have justified the current pricing per global standards that indicate that Indian mobile phone tariffs are on the lowest end of the global price range. While import duty on mobile phone components has been cut and is expected to bring down the one-time cost of owning devices, it is the regular monthly bills that are of concern at present. Subscribers may land up paying more for service charges than for the actual talk-time. Ernst & Young Partner, Ashish Basil, has recently opined that this service tax hike may not really deter telecom operators from going ahead with yet another 20-30% tariff hike in future if need arises, as they have already been mulling on it for a while now.

While Indian mobile tariffs are among the lowest in the world, it is quite interesting to note that the Indian telecom sector attracts the highest tax rate of 23% at the global level. According to Airtel's CEO Sanjay Kapoor, about 30% of revenues from the customer go towards some form of taxation. It is not only the consumer but also the service provider who is affected by the current Government policies and taxes, and service providers are now pushing their costs to the consumer.  

With high licensing and roll-out costs, 3G services yet to pick-up, 4G in the offing, and the existing basic services being taxed, it is not surprising that the recent GOI's Economic Survey has predicted an 85% decline in telecom sector profits (after tax) for 2011-12.

About the author : Lakshmi.A  is a Contributing Editor for TradeBriefs. She can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

The average Indian is so steeped in conventional business and finance practices that it is quite an effort to lure him into the world of electronic or mobile payments, leave alone the use of ATM and credit cards; No this is not the educated urban Indian that I am referring to here, but then a few of us still shy away from virtual purchases and payments. Mobile wallets in India are is still in the very nascent stages of adoption though they offer an easy alternative to carrying cash or cards. The current wallets applications store debit or credit card and bank account information in an encrypted form on the device that is used to make all kinds of payments such utility bills, insurance premiums, ticket reservations, e-shopping and the likes.

The Airtel Money feature is quite simple to as the account can be simply topped-up by recharging at the Airtel stores and be used for making payments. Money can in fact be transferred from one Airtel Money Wallet to another or bank accounts depending on Airtel Money account type (Express or Power) registered for, making it quite easy to handle payments and purchases, of course there are charges associated with such transfers. With RBI removing the cap (earlier limited to Rs. 50,000) on mobile transactions, free flow of money is now possible, which once again is based on the account type in case of Airtel Money.

While the mobile wallet process may sound simple and the account, card details if at all stored on the device and most communications being encrypted, security is still a major concern in mobile payments. Factors such as virus attacks, malware, malicious mobile applications that are known to be sending personal data out of the devices and interrupted phone networks leading to failed transactions that still manage to debit accounts go to prove that the environment is still vulnerable to security threats and transaction integrity.

Despite present drawbacks, the mobile wallet market is getting ready for some stiff battles as Google and Apple plan their entry into this domain.  Google has launched its Google Wallet app, initially addressing purchases from the Android market. App developers will now have to forcibly switch to Google Wallet to accept payments on app purchase instead of Paypal or other payment options. The catch here is that transaction charges on Google Wallet are much higher, and are bound bring-down profit margins of app developers looking to market their Android apps. Google Wallet users will be able to set individual credit limits and a unique PIN to prevent misuse even if the device is compromised.

Future of mobile wallets now tend to evolve around the latest "Near Field Communication" NFC technology build on the NFC chip that allows automatic communication between mobile devices when in contact with each other (single touch), without any specific permissions.  Simply tap the mobile phone on the NFC data reader at the point of sale, key in the bill amount and a PIN if required and complete the purchase. NFC chips also guarantee better security because sensitive data on them is not accessible to the mobile environment. Google Wallet already supports NFC use, while Apple, RIM, Sony Ericsson and Nokia are all planning to incorporate the NFC chips on select versions of their devices by the end of this year. 

As mobile wallets become increasing popular and make payments and purchases easier, I can't help but think about the spend in the offing. Will Airtel Money trigger impulse spending? Especially when you can have all the money you want at the right place and the right time? I'd rather be guarded on the amount of money I have on hand!

About the author : Lakshmi.A  is a Contributing Editor for TradeBriefs. She can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it