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Reliance Jio watch out! Airtel offers shocking 4G price of Rs 51/GB

airtelBharti Airtel has fired its biggest salvo against the upcoming onslaught of Reliance Jio by cutting 4G and 3G data price for heavy users to an unprecedented Rs 51 per GB.

Though the plan can be availed by anyone, it will make financial sense only to those who use at least a 2-3 GBs per month. Why? Because, to get the offer of Rs 51 per GB for one whole year, you have to pay Airtel a ‘rent’ of about Rs 1,450.

In other words, you are paying about Rs 125 per month just to have the privilege of getting data at 51 per GB.

HOW TO GET THE OFFER

To get the offer, Bharti Airtel customers have to recharge with a particular denomination (Rs 1498 in most circles), which includes the cost of the first 1 GB.

Subsequently, they can continue to recharge as and when they like with Rs 51 and get 1 GB of 4G data credited to their balance. Each 1 GB is valid only for 28 days, and they can most likely be clubbed together, though that is not very clear from Airtel’s statement.

“There is no limit on the number of recharges during the period and higher the number of recharges the more value a customer gets. These prepaid packs are live in Delhi currently and will get launched across circles by Aug 31st, 2016,” Airtel said.

The offer is, by far, the cheapest 4G offer in India other than Reliance Jio’s free unlimited Preview scheme.

JIO EFFECT

The new plan underlines the tremendous competitive pressure that telecom operators are starting to feel with the entry of Reliance Jio, the biggest 4G operator in India.

Though Jio has not started its operations in the country on a commercial basis, the network is live for all intents and purposes.

The company, promoted by Mukesh Ambani, has not revealed its tariffs yet, but is expected to do so in the next two weeks.

Bharti Airtel’s aggressive response suggests that the company has got wind of some majorly disruptive offer from the upcoming challenger.

There is a high chance that Jio’s ‘big offer’ may be unveiled at the annual general meeting of Reliance Industries that will be held on Thursday.

IMPACT ON BOTTOMLINE

Airtel’s offer is designed to do two things.

First, it rewards heavy users. Second, it provides an incentive for the user to stick with Airtel and not move away.

For example, if a person uses only 1 GB per month, then, at current prices, he will spend about Rs 150*12 or Rs 1,800 per year.

Under the new scheme, he will spend Rs 1500+(12*51) or Rs 2,100 per year.

However, when it comes to 2 GB per month or higher, the new scheme will turn out to be cheaper than current schemes.

The real benefit will reaped by those who use 10 GB or more per month. At present, 10 GB per month on any of India’s 4G networks costs Rs 12,000 per year. Under Airtel’s new scheme, 10 GB per month will cost only Rs 7,600 per year.

And if someone uses 30 GB per month, the current prices would have set you back by Rs 36,000 per year. Under the new plan, it would come to roughly half of that, or Rs 19,500 per year.

From the investor perspective, the offer could dilute the money that Airtel gets from around Rs 225 per GB at present to about Rs 125 per GB over the next six months or so.

NOT THE CHEAPEST PLAN

While the offer may seem ultra cheap by previous standards, it’s certainly not the lowest that telecom companies can go, or have gone.

For example, MTNL used to offer 200 GB for a year at Rs 5,000, which works out to Rs 25 per GB.

Similarly, Reliance Communications and MTS used to offer 40 GB for Rs 1,000, which also works out to Rs 25 per GB.

However, unlike Airtel, which should be able to deliver speeds of at least few Mbps, these companies offered their data at about 1-2 Mbps.

Another company that has responded to Reliance Jio’s impending launch is BSNL, which has started offering 10 GB of data for Rs 549 and unlimited data at Rs 1099 per month.

However, the problem with BSNL’s service — like the above mentioned CDMA services — is speed and consistency.

In many areas, BSNL — which uses HSDPA technology — is able to provide less than 500 Kbps of bandwidth due to congestion. There are, however, some locations where BSNL still offers consistent speeds of 5 Mbps or more, but such spots are rare and far between.

It is assumed that the real cost of serving 1 GB of wireless data is between Rs 10 to 30, depending on which operator one is talking about. The costs would be the least for Jio, whose offerings could be even cheaper than what Airtel is providing under the new pack.

WHAT NEXT?

With Airtel letting the cat out of bag with the new offer, it remains to be seen how its other two competitors, Vodafone and Idea respond.

While Airtel has around 30 MHz of 4G spectrum in most areas in India, these operators have only 10 MHz. As a result, for the same number of towers, Airtel and Jio can carry four to five times the data that Vodafone and Idea’s network can carry.

Therefore, to expect Idea and Vodafone to cut their prices to the same degree that Bharti Airtel has may be far fetched, as their network could be completely choked by the kind of traffic that such offers generate.

However, given that Airtel has a pan-India presence, these operators will be left with no choice but to follow suit. And once their networks get clogged, they will have to either buy more spectrum or build more towers or join forces and club their spectrum together.

There have already been speculation that Idea and Vodafone are in talks to share their networks.

Idea and Vodafone also have the option of diverting at least of the two 3G spectrum blocks that they have between them to 4G, thus increasing the overall capacity of their network. Both Idea and Vodafone have 1 block (5 MHz) each of 3G spectrum in many places in India. The spectrum can be used for both 3G and 4G, and is widely supported by 4G handsets in India.
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