Bharti Airtel said it expects prices in India’s telecom sector to start climbing again in around six months or so, and indicated it has no stomach for further price competition with newcomer Reliance Jio.
The comments by company officials come a few months after Reliance Jio slashed its 4G prices citing actions from rivals such as Airtel to reduce their own prices.
Jio, which had promised on launch to deliver 20% more data than its rivals, has kept cutting its tariff whenever Airtel has tried to come close to its pricing.
“We don’t want to further destroy pricing in the market. What we’d like to see, as a player in the market, is to see pricing lift,” Airtel CEO Gopal Vittal said after detailing the company’s quarterly results.
Data prices in India have come down by more than 90% since two years ago, when Reliance Jio entered the industry. From around Rs 220 per GB, they are now at Rs 10-20 per GB.
The last round of price cuts took place at the turn of the year, leading to a desperate appeal by former Idea Cellular CEO Himanshu Kapania to his rivals to stop the ‘war’.
Vittal seemed to be on the same page as Kapania.
“Beyond a point, bringing pricing down is going to hurt the whole industry. Industry revenues have fallen from close to 2 lakh cr to 1.2 lakh cr,” the Airtel CEO said.
Part of the reason why Jio is able to cut its prices is that it does not focus on how much money it is able to get by selling 1 GB of data. Instead, it focuses on how much money it is able to get from one customer – or ARPU.
While Bharti Airtel’s ARPU — the average amount spent by a customer per month — was around Rs 195 when Jio entered the scene, it is now at Rs 105.
Jio, despite selling its services cheaper, is able to generate Rs 135 per month from each of its customers.
Vittal, however, indicated that Airtel has one eye on prices even as it tries to shift its focus to ARPU. He said current voice and data “clearly unsustainable”.
“My own sense is that prices should start rising in the next six months. Hopefully, we’ll start seeing some rising movement,” he said.
Asked if Airtel hopes to ‘bring back’ all those customers who moved to Jio to enjoy cheaper services, Vittal said some customers are looking for “the best deal.”
“Given that we’re at a premium, some of these customers may be difficult to attract back,” he said, adding that his company will try to pitch its ‘better network’ to win customers.
He also said he was not losing sleep over the migration of low-spending, voice-only customers to Jio due to the launch of the Rs 500 Jiophone.
Jio has already sold 25-30 mln of its Jiophones, which have largely been lapped up by price-sensitive customers of networks like Airtel and Idea.
However, Jio’s success in selling Jiophones has dragged the company’s ARPU. From around Rs 155 per month nine months ago, they have fallen to Rs 135 per month.
Jio offers its users unlimited monthly calls at just Rs 49 per month, around half of what its rivals price such offerings.
Jio’s ARPU could go down further as more and more voice-only customers sign up via the Jiophone, and Vittal indicated he was not overly worried about the loss.
“We’d be delighted with a better quality of customer base. If we have to shed some customers at the low-end, we’d be happy to shed those customers,” he said.