Peers Need to Cut Data Prices to Take On Jio Offer Violated Trai Tariff Orders: Voda
Though telcos will be forced to offer competitive rates to hold on to top-end users, Jio move to charge may bring a sense of relief to the sector: COAI chief a month a month a month a month Move causing damage, telco tells HC; Jio plea should be raised at
(Offer for existing users, those subscribing by March 31, 2017, valid till March 31, 2018)
of data for 90 days at for 30 days at Kolkata: India’s big telecom companies, Bharti Airtel, Vodafone India and Idea Cellular, will be forced to slash data rates soon to hold on to their upper-end customers with Reliance Jio Infocomm’s decision to offer unlimited voice and nearly 30 GB of data at a modest monthly charge of .₹ 303 from April 1, analysts and industry experts said.
Reliance Industries chairman Mukesh Ambani on Tuesday said existing Jio customers would have to pay a nominal .₹ 99 membership fee and another .₹ 303 a month to avail of all the benefits of the unlimited voice and data ‘Happy New Year’ offer.
Jio’s latest move, they said, is clearly aimed at luring Airtel, Vodafone and Idea’s top-end customers, among whom a section is reckoned to be already using Jio as a second SIM. “Holding on to these upper-end customers will be pivotal for the big three to remain profitable in the coming quarters as these users generate over 60% of their revenues,” a senior industry executive, who did not wish to be named, told ET.
Brokerage Sanford Bernstein said Bharti Airtel is likely to have the least number of defectors because of its national 4G coverage and a premium brand position. “Idea, with no 4G coverage in Delhi and restricted 4G spectrum in Mumbai, is likely to see the highest rate of defection. We expect Vodafone to be somewhere in the middle,” the house said.
The existing players say they are aware that desperate remedies by way of steep data rate cuts to hold on to top-end subscribers could come at a huge cost for the incumbents. “Any effort to match Jio’s tariffs could progressively shave off nearly 40-50% of the revenue that Airtel, Vodafone and Idea typically generate from upp- er-tier customers, which would hit the overall average revenue per user (ARPU) and hurt both, the top-line and bottom-line,” said the executive of a leading telco.
According to industry experts, upperend customers on an average generate monthly ARPUs in the .₹ 700-1,000 range, and that could fall sharply if the incumbent biggies are forced to reduce the price points of their heavy data packs.
Incumbent carriers could end up “paying a heavy price” for not doing enough to ringfence their high-end customers since Jio’s entry last September, the experts said. “Most have essentially focused on holding on to prepaid users by offering discounts, instead of taking proactive steps to retain top-end users, who might now find Jio’s offer of nearly 30 GB of 4G data with unlimited voice calling at .₹ 303/month super enticing,” they pointed out.
Rajan Mathews, director general of the Cellular Operators Association of India, agreed that incumbents “would definitely come up with competing price points to hold on to their valued, high-end customers,” but added that Jio’s decision to charge “is bound to bring a sense of relief ” to the sector as the services will not be free anymore from April.
Nitin Soni, director at rating agency Fitch, had earlier told ET that he expected incumbents’ data revenue per user to shrink by 1520% over a12-month span, post Jio’s launch. Industry experts, in fact, expect top incumbent carriers to see a sharp 25% fall in data realisations over the next one year.
However, Bank of America Merrill Lynch (BofAML) has a contrarian view. “If Jio starts charging .₹ 303 a month, such offers may not be dilutive for Bharti/Idea as their average ARPU is below .₹ 200,” it said.
In fact, the brokerage said Jio’s offer “might lead to some traffic moving back to the top telcos”, adding that it is also “not overly worried” about Jio’s stated ability to offer 20% discount on existing tariffs. New Delhi: Vodafone India on Tuesday told the Delhi High Court that new entrant Reliance Jio Infocomm’s free voice services violated tariff orders issued by the telecom regulator, which, in turn, were causing damage to India’s second-largest telco.
However, Jio countered the company’s stand, arguing that the plea should be raised at the appropriate forum, namely the telecom tribunal or Telecom Disputes Settlement and Appellate Tribunal (TDSAT), in the same way as other incumbents – Bharti Airtel and Idea Cellular – have done.
Justice Sanjeev Sachdeva will hear the matter further on February 27.
Vodafone India argued that inter-connection usage charges (IUC) form the flo- or price as per Telecom Regulatory Authority of India (Trai’s) tariff orders, and “one cannot go below that”. The company argued that Jio was providing free voice calls and by continuing to do so beyond the promotion offer period of 90 days, it was violating IUC and tariff regulatory rules. It added that free plans can be offered as long as the weighted average of all other plans of a telco complied with the IUC floor price.
In response to the court question on subscribers opting for only free plans, Vodafone said telcos have to tailor their plans in such a way that customers opt for other plans also as the operating costs have to be recovered as per tariff orders.
It added that all Jio plans had voice calls free, and it was also aggrieved by Trai’s inaction and its stand of allowing the alleged violation to continue.
Reliance Jio, on the other hand, opposed the maintainability of Vodafone’s plea, and said the regulator had given the new entrant a clean chit. Vodafone had moved the high court on February1against Trai and asked the court to direct the regulator to “fully implement/ensure compliance of each and all regulatory and legal principles” laid down in the tariff orders. The company had claimed that Trai has also failed to implement the telecom department’s (DoT) circulars, which say that all tariffs must be compliant with the IUC norms and should be non-discriminatory and non-predatory.
It had also sought that Jio should be told by the regulator not to violate these rules.
TDSAT is simultaneously hearing appeals by telecom service providers Bharti Airtel and Idea Cellular questioning Jio’s free services. It has asked the regulator to furnish details and copies of Jio’s Welcome and Happy New Year Offers.
Existing Jio customers would have to pay a nominal 99 membership fee: Ambani
1 GB data per day Unlimited calling
1 GB 4G data for 28 days Unlimited calling
50 MB 3G or 1 GB 4G data for 4G handsets Unlimited calling
1 GB 4G/3G data for 28 days 30 GB 1,495 35 GB of data 1,500