KOLKATA: Top telcos Bharti Airtel and Idea Cellular’s decision to increase postpaid data rates in some markets signals attempts by incumbents to protect their data revenue realisation levels to withstand a potential tariff war post Reliance Jio Infocomm’s entry later this year, say analysts and experts.
The latest rate hikes, they said, are a pre-emptive bid to create a revenue cushion of sorts for absorbing imminent data tariff cuts closer to Reliance Jio’s launch in December.
An analyst at a foreign brokerage said the latest hike by Airtel and Idea “is an attempt to set a higher base to ensure an imminent tariff war in the near future is not detrimental to business”.
“Securing data realisation before a potentially bruising tariff battle with Jio is critical for India’s top three telcos, which grabbed nearly 92% of the incremental revenue market share (RMS) in the April-June quarter, which was largely propelled by data revenue,” said the analyst cited above.
“This cushion could help them bring down rates at a future date, and show their subscribers the desire to be competitive in pricing when Jio launches.”
A mobile carrier’s incremental RMS reflects the portion of increase in industry revenue that accrues to the telco. Analysts expect incumbent GSM carriers such as Bharti Airtel, Vodafone India and Idea Cellular to rely more on data revenue for growth in coming quarters as incremental improvements in the voice pie are expected to be marginal. Data is known to ring in higher revenue and margins, and flows directly into a telco’s profits.
Vodafone India declined to reply to ET’s queries but two people familiar with the matter said the country’s secondlargest mobile carrier is evaluating a possible response to Airtel and Idea’s moves.
Vodafone India’s new CEO Sunil Sood told this paper earlier that the company is preparing itself for whatever happens, post Jio’s entry, but asserted that the British telco charges a premium over competition. Bharti Airtel has reportedly increased postpaid data rates in Delhi, Haryana, Himachal Pradesh, Maharashtra, Punjab, Rajasthan, UP-East and UP-West circles, while Idea has similarly increased rates in Delhi, UP-West and Punjab.
Both companies did not disclose the reasons behind their latest data rate hikes by roughly 20%. Some, however, say there was a risk to this move as the telcos may end up irritating their long-term subscribers in key markets in the run up to Jio’s 4G rollout.
“Dissatisfaction levels over the quality of premium data services run pretty high, and by raising 2G and 3G data tariffs at this stage, Bharti and Idea may have missed out on an opportunity to cut data tariffs, make a genuine difference in the market and queer Jio’s pitch,” an analyst said.