Idea Cellular CEO Himanshu Kapania sounded a note of caution and urged Bharti Airtel and Reliance Jio to stop trying to beat each other by cutting prices.
“We don’t want to participate in the present level of price drops,” Kapania said, in the context of the company’s quarterly results.
“We are hoping that the volatility that has happened in the past three weeks will harmonize and that both the leader and the new entrant will settle..”
Kapania said earlier, price cuts served as a stimulus for reluctant customers to start experiencing mobile data and every price cut brought in new customers and enticed existing customers to consume more data.
However, the last three weeks have seen price cuts that will only create pain and no gain, he warned.
Jio has halved its data prices in two rounds of price cuts, first at the beginning of the year, followed by another scheduled for this weekend.
“The revenue decline will be very steep for both the companies.. for what gains? Even the current prices that are offered is getting very good demand from the consumers. It is very very robust,” he said. “There’s enough demand at current prices without needing to go for further discounts.”
The price cuts are not going to bring new customers from smaller operators either, as there are hardly any smaller operators left, he pointed out.
“The universe of 4G (handsets) remains much smaller (compared to other technologies)” he said.
“The price drop only hurts both these companies. It’s not as if the 4G handsets are lying elsewhere,” he said.
“Because there’s no sufficient (incremental) customers on the 4G side, it will not give you commensurate gains to the price drop. Volumes will not compensate for the loss of revenue,” he warned.
Kapania also said his company will ‘keep a distance’ from the current spate of price cuts.
“We are not there to continuously bring prices down. We would prefer that there is a far stabler environment… It is important that the investment in digital continues,” he said.
Instead, said the CEO, Idea Cellular will focus is on its merger with Vodafone.
“We do not want to be a price warrior. We will maintain reasonable distance,” he promised, adding that Idea is getting 50-75 rupees more per month from its unlimited customers compared to Jio.
This, he said, means that Idea is not directly competing with Jio, and that the new entrant need not get worried about Idea coming too close to its prices.
He said it is only a matter of time before Airtel and Jio realize the futility of engaging in a price war.
“(I’m) fair degree of confident that it’s a passing phase.”
Even though Kapania’s statement about there being no more small operators to snatch customers from may be right, it is also quite possible that Jio and Airtel may have identified Idea itself as the vulnerable operator whose subscribers are up for grabs.
Idea and Vodafone are caught in a difficult situation as they are waiting for the government to clear their merger before implementing large-scale network changes to support high levels of data.
Without the network reconfiguration, Idea and Vodafone will struggle to compete with Airtel and Jio — a fact that these two operators clearly know.
Speaking last week, Airtel CEO Gopal Vittal hinted that his company will go aggressively after Idea and Vodafone users.
“It is tough to pull off pull off a merger of any two players, let alone two very large companies,” he said, adding that when Vodafone and Hutchison merged in Australia, the two lost a combined market share of 13 percentage points.
That said, Kapania is not expected to sit by and watch the bigger players try to snatch his customers away. The company has been keeping its tariffs in sync with those of Bharti, and is expected to continue to do so.