Bharti Airtel, Vodafone India and Idea Cellular may have to take a call on data rate cut to counter Jio offer

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 Rs 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 Rs 99 membership fee and another Rs 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 Bernstain 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 upper-tier customers, which would hit the overall ARPU and hurt both top-line and bottom-line,” said the executive of a leading telco.

Also Read: Jio will charge customers from April 1, but it won't burn a hole in your pocket

According to industry experts, upper-end customers on an average generate monthly ARPUs in the Rs 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 Rs 303/month super enticing.”

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, earlier told ET that he expected incumbents’ data revenue per user to shrink 15-20% over 12 months, post Jio’s launch. Experts, in fact, expect top incumbent carriers to see a 25% fall in data realisations.

Bank of America Merrill Lynch has a contrarian view. “If Jio starts charging Rs 303 a month, such offers may not be dilutive for Bharti/Idea as their average ARPU is below Rs 200,” it said. The brokerage said Jio’s offer “might lead to some traffic moving back to top telcos”, adding that it is “not overly worried” about Jio’s stated ability to offer 20% discount on existing tariffs as “top telcos may have many offers which they do not even publicise and may even offer custom-made packages”. It says high-end customers are unlikely to switch (to Jio) on the basis of a 20% discount as “quality of network and service is important”.