Will RJio Put Telcos Under ‘Tariff’ Pressure In 2017?
Reliance Jio Infocomm, which brought huge disruption in the Indian telecom sector with free voice and data last year, has intensified the tariff battle in India. All the prominent telecom players have flexed their muscles to bring down the ‘datagiri’ of RJio with a substantial drop in their voice and data prices. The great Indian tariff battle is set to further intensify with telcos such as Idea, Vodafone and Airtel are going more aggressive on voice and data charges to beat RJio. End users are certainly the biggest beneficiary in the ongoing price race. At the same time the tariff battle seems a reflection of RJio’s price pressure on competitors.
No Option But Reduce Prices
Since the entry of RJio in the telecom market in India in September, all the telecom players, including BSNL have substantially dropped their voice and data charges. Interesting, RJio’s recent announcement of the extension of its free service till March 2017, has further increased tariff pressure in tax resulting in a substantial drop in voice and data prices of Vodafone, Airtel and Idea Cellular.
In an attempt to surge RJio in the race of free services, Bharti Airtel announced a special offer of free data for 12 months on select prepaid and postpaid plans to customers who switch to Airtel 4G. The 12 months offer is available to any customer with a 4G mobile handset that is currently not on the Airtel network. The move majorly aims to snatch the subscribers of competitor telecom players who are not satisfied with their carriers.
Airtel is reportedly mulling to buy Telenor’s India business for $350 million. The deal expects to allow Airtel to add to its 4G spectrum and be better placed to take on Reliance Jio.
Similarly, RJio’s second biggest competitor, Vodafone has launched two new unlimited voice call packs with additional data benefit. Under the new inferior scheme, Vodafone users will get unlimited voice call from Vodafone-to-Vodafone with extra data benefit while the higher value will allow users to enjoy unlimited voice call from Vodafone to any other networks for 28 days.
Price, Not The Only Winning Factor
While Airtel and Vodafone are aggressive on tariff prices, fellow player Idea is focusing on widening its network coverage across the regions with its high-speed wireless broadband services. The company recently announced the expansion of its 4G network in over 1000 villages in Karnataka. The company has invested in setting up network infrastructure and laying and maintaining Optical Fibre Cable in the region. Idea plans to almost double its 4G sites by March‘17.
Idea is also heavily focusing on building a robust network of channel partners across the regions. The company recently launched a new app ‘Dhruv’ for partners and distributors. The new app will enable Idea Cellular authorized distributors to ease up their work of offering services to consumers. With this move, Idea intends to enhance the brand recall among users by giving quality customer support.
How Telcos Look Like In 2017
Though the price fall in tariff plans is in favor of subscribers, it will certainly have a huge impact on the revenue earnings of telcos in a big way in 2017. In fact, major telcos are already bracing dip in margins and revenue amid increased expenditure on network infrastructure. Therefore, the year 2017, is going to be a tough year for telecom players.
According to PwC, following the price war on mobile data in India, telcos will experience reduced data realization as an increase in data traffic will not compensate for lower data revenue. Consultancy firm Deloitte, expects pricing pressure to continue till a new paradigm on pricing is reached. “Profitability and cash flows will continue to be under pressure till profitable data play picks up in a significant way with linkages with Internet of Things and solutions for other business,” Deloitte said.
It is a fact that RJio has disrupted the equations in the telecom business in a big way. However, price will not be the only success or differentiating factor for telcos. Analysts believe that efficiency, effectiveness and cost control will be the focus areas for telcos in 2017. The expanding network coverage, rising shift from a feature phone to smartphone and government’s push for digital India will further fuel the growth of both incumbents and the new entrant.
(Image Courtesy: Coolmagz)
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