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Jio Effect: Aircel slashes 3G rates; Will others follow?

aircelBack in 2011, when 3G services were starting to be launched, there would be new announcements every three or four weeks from each operator on new tariff plans.

Some would offer ‘free 3G’ along with voice recharge, some would offer combo plans, some heavy usage plans such as 10 GB for Rs 999 and so on. Over the next one year or so, telecom operators settled down on their data tariffs.

For players like Aircel and Tata DoCoMo, the sweet spot was around Rs 200 per GB, while it was Rs 250 per GB for ‘premium’ operators like Airtel, Vodafone and Idea.

Not surprisingly, the vision of 3G leading to lots of Skype calls, online movie watching, live cricket on your phone and so on never took off. Many start-ups which started data and video streaming services struggled to attract users in India.

The reason? A single movie would require you to spend around Rs 150-200 to watch on your mobile. For the same price, you could actually go to a movie theater and watch it on the big screen.

There was tremendous demand for data services, including for online video. But the operators were happy even if the average person used only 500 MB per month. After all, the average expenditure on mobile services in India was still around Rs 150 only.

SECOND DATA REVOLUTION

It has taken the risk appetite of India’s richest man and almost Rs 1 lakh crore of investment to shake the industry out of that complacency.

With enormous economies of scale, Reliance Jio — promoted by Mukesh Ambani — is all set to offer data at rates that will finally make watching video on your mobile phone possible — five years after such promises were made by the industry at the time of 3G launch.

And it looks like Jio’s move could trigger an industry-wide shift in culture from nominal data consumption of half a GB per month to heavy data usage of several GBs per month per customer.

In this direction, Aircel Cellular, which has 3G spectrum in 13 circles, said on Monday it was slashing its 3G data prices by over 50%.

Under the new tariff, it will offer 7.5 GB of internet at just Rs 399, implying a per-GB cost of just Rs 53. Before this offer, it was giving 8 GB of 3G internet at Rs 997, or Rs 125 per GB.

For Rs 798, an Aircel subscriber can now get 15 GB of 3G internet valid for one month, and with 15 GB, he or she can indeed now start tapping into services such as song downloads, online streaming of movies and so on.

Of course, Rs 798 is still a substantial amount of money for many users, but at least 10% of Aircel’s users would be likely users at such rates compared to the earlier tariff of around Rs 1800 for a similar amount of data.

Aircel also announced two other packs — Rs 79 for 1 GB and Rs 249 for 3 GB. Earlier, the two packs cost Rs 198 and around Rs 500 respectively.

The move can be seen as a response to two factors — the abysmal uptake of 3G services, and the impending launch of Reliance Jio, which will offer rates of around Rs 50 per GB for average-to-high users.

With the launch, Aircel has easily become the most affordable 3G operator in India.

The closest competitor to Aircel is BSNL, which used to offer 1 GB of 3G data for Rs 68 with a validity of 10 days (unlike Aircel, which offers a validity of one month.)

However, with increasing take-up, BSNL has since then reduced the validity of the pack to just 3 days, which has reduced the attractiveness of the plan for most people.

However, the big question is when, not if, other operators like Bharti Airtel, Vodafone and Idea Cellular will follow suit. Will they wait for Jio to launch or will they pre-emptively slash prices?

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