“They have been maintaining that they will match once Jio starts charging for customers,” said a stock analyst based in Mumbai. “That time has come. If they don’t match it, they’re going to be priced out.”
At present, the cheapest tariff from Airtel is 6 GB for Rs 147, but that is given only to its ‘at risk’ customers.
The company identifies customers at risk by checking if they are heavy data users and whether they use a 4G-enabled phone or any other high-end model. For example, people who spend only Rs 150 per month and use no data do not make up key customers.
Speaking to investors last month, the company’s CEO Gopal Vittal said he was aware that a large chunk of their premium customers are currently using Reliance Jio’s services via additional SIM cards even as they remain on Airtel’s network.
“The good news is that these customers are still on our network, we know who they are. And I think once pricing commences, we will see how they will make choices of where the traffic has got to go. We have been through this game in the past,” he said, promising that his company will compete with matching tariff plans once the new entrant reveals its hands.
Jio chairman Mukesh Ambani today announced a new tariff plan that sells 1 GB of data per day and unlimited calls for Rs 303 per month.
Vittal is likely to respond by matching the tariff on the 4G data side.
It is estimated that the capacity utilization of the 4G networks of RJio’s rivals is the single digits. This could dip further as they continue to add new base stations. The Ambani firm is reported to be carrying 94% of India’s total wireless data traffic.
As such, the incremental cost of selling data is almost zero for the incumbent players.
Therefore, say most industry watchers, these players are likely to borrow a leaf out of Ambani’s playbook and spoil users with ultra-low 4G prices till March 2018. In fact, Vittal hinted at such plans even as he spoke last month.
“Our focus is how do we continue to hold on to our customer base, how do we use the utilization of our network, which is sitting today at a low level on the data side in order to drive consumption and to remain competitive in the marketplace,” he told investors.
Although Jio may look like it is giving 30 GB for Rs 303 per month, the actual usage of data will be close to around 13 or 14 GB per month per subscriber. This is because data keeps lapsing or expiring every day, and most people do not use their exact 1 GB allowance every day.
At 13 GB per month, the actual cost comes to about Rs 23 per GB. Both Bharti and Idea Cellular are already providing 4G data at Rs 25 per GB under their promotional schemes.
“They have two options: One is to provide a differentiated scheme, say 15 GB for Rs 300, while the second option is to simply offer 1 GB per day for Rs 300 per month,” said a telecom industry veteran who now serves a consultant to operators.
Though Jio also provides free calls with its data, voice is not the key driver for people straying from incumbent operators, according to this person. Typically, voice costs only around Rs 200 per month, while data costs can run into thousands of rupees for those who consume video.
“The lure is the data. That is what they need to address on a priority. Once they roll-out their own VoLTE services, they can add unlimited calling to the mix,” he added.
For now though, none of the rival operators have commented on Jio’s move.
They have already taken the company to the courts over its previous promotional offer, and may explore legally challenging the scheme announced by Ambani today.
“The matter is already in TD-SAT and the TRAI is also trying to get a legal definition of what constitutes predatory pricing and what doesn’t. That is great. But what they can’t afford to do is to wait for the judgments to be delivered,” the consultant added.
While industry sources and analysts were more certain about Bharti responding to the new scheme, they were less certain of an equally aggressive response coming from Idea Cellular or Vodafone. The two companies are engaged in talks to merge their operations in India to better compete with Jio.