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

The Economic Times - - Companies: Pursuit Of Profit - Kalyan.Par­bat@ times­ Our Bureau

(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

Un­lim­ited call­ing

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


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