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Data rates cut: How Airtel, Vodafone, Idea make it difficult for Reliance Jio to poach customers

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NEW DELHI: Bharti Airtel has slashed effective data rates for its pre-paid customers, offering upto 67% more benefits for the same price, tracking a similar move by rival Idea Cellular a couple of days back as the scramble for users of mobile broadband intensified approaching Reliance Jio Infocom’s 4G launch.

Vodafone India, India’s No. 2 carriers, is also planning to make similar moves in the coming days in a bid to be “in line with the market trend,” a person familiar with the matter told ET. A Vodafone India spokesperson declined to comment on the matter.

Last week, No. 3 telco Idea Cellular had also slashed effective data rates by offering up to 45% more data benefits for its prepaid users in India who use less than 1GB, as incumbent telcos stepped up their efforts to attract new users and ring-fence existing data customers ahead of Jio’s 4G services launch widely expected next month.

Data rates

“These refreshed data packs will help drive consumption and boost the uptake of mobile internet in the country,” Ajai Puri, Director – Operations (India & South Asia), market leader Bharti Airtel said.

As announced by the telcos, the initial rate cuts are just for the prepaid customers that currently make up more than 90% of these companies’ respective subscriber bases in the country and are considered more vulnerable to switching operators than post-paid users.

Analysts note that telcos aren’t reducing rates directly but offering more bang for the buck, a strategy that will help them protect their crucial average revenue per user (ARPU) but, at the same time, make their offers more attractive for users.

But they add that for the new entrant or any other existing players to expand or alter the affordability curve and expand the data user market, at some point, the data tariff may itself have to go down.

“This is a preemptive move by telcos who are trying to retain their customers and increase customer sickliness as the new entrant looks to launch services in coming months,” Rohan Dhamija, partner and head of India and South Asia at consulting firm Analysys Mason said.

They are trying to “replicate” in a pre-emptive manner what the new entrant might itself do, to begin with giving more for the same, Dhamija said, adding that the incumbents are trying to make it difficult for Jio to poach their customers.

Explaining Airtel’s possible strategy in the event of a price war, Gopal Vittal, Bharti Airtel CEO for India, South Asia, had told ET previously that what matters was the average revenue per user, or protecting the headline revenue. And for that, it could offer additional bandwidth to higher-paying users even though it would pressurize its returns from data Web Posting Pro.

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According to an industry insider, Mukesh Ambani-owned Jio is unlikely to disrupt the pricing, rather focus on offering more for the same—which the incumbents have started to do—or try to differentiate on the product with the content play.

But the bigger risk would be if Jio makes voice calling free with bundled data to get the short-term market share if it fails to get users organically.

“By cutting price data price, followed by giving voice free, Jio might well disrupt the voice market,” the person said.

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Spent 2001-2004 buying and selling robots in Bethesda, MD. Spent several months working with tinker toys in the UK. Won several awards for selling teddy bears on Wall Street. In 2009 I was developing strategies for sausage in Prescott, AZ. Once had a dream of supervising the production of corncob pipes for no pay. At the moment I'm creating marketing channels for magma for the government. Communicator. Beer lover. Social media advocate. Travel guru. Pop culture evangelist. Entrepreneur.
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