You are here: Home » Economy & Policy » News
Business Standard

Non-predatory rules: Slightly negative for incumbents but Jio to gain

The Mukesh Ambani-owned company had also complained to Trai about incumbents offering segmented offers to different customers

Kiran Rathee  |  New Delhi 


The non-predatory tariff rules announced by sectoral could adversely impact incumbent operators like Bharti Airtel, and as the new norms restrict their pricing flexibility, whereas new entrant will be left untouched at least till the time it achieves a market share of 30 per cent.

According to the order by Regulatory Authority of India (Trai), a tariff can be considered predatory if a significant market player (SMP) offers services at a price, which is below the average variable cost in a "relevant market" with a view to reduce competition or eliminate competitors.

"The tariff order restricts predatory pricing by players with more than 30 per cent subscriber/revenue market share and puts no restrictions on promotions from Jio which is the dominant player in data with 4 times more volumes than or Idea+Vodafone," said in a report.

Also, has disallowed operators from sending special offers to select customers through SMS or messages, which is likely to impact old operators as they have historically been making segmented offers which at times are used to prevent customers from porting. The has directed that all tariff plans have to be publicly disclosed to all customers and filed with Currently, Jio has a single transparent pricing for all customers. The Mukesh Ambani-owned company had also complained to about incumbents offering segmented offers to different customers.

Further, the has said whenever differential tariffs are offered, it shall be the responsibility of the operators to define in a transparent and unambiguous manner the eligibility criteria for availing such differential tariff. Analysts said this change can potentially reduce the flexibility in pricing for the incumbents.

Analysts also feel that average variable cost is a weak metric to be used as the floor price for identifying predatory pricing in a sector like a which has a very high component of fixed costs such as spectrum, network, employee, advertisement, etc with minimum linkage to volumes.

Ignoring the fixed costs leaves significant scope for below-cost pricing by all operators including SMP. As per Credit Suisse, the cost definitions used to mean that the current tariff levels even by aggressive players will comfortably pass the test.

The analysts further said even if Jio becomes SMP in certain circles, its low priced offers can continue as its variable cost per minute or per GB is likely to be very low, thus making this proposal redundant and not provide any long-term solution to the sector's problems.

Estimates show Airtel is a significant market player in 15 circles, in four and Idea in three. However, after the merger, Idea-will be a significant market player in about 16 to 18 circles. Jio also has gained around 18 per cent share in circles like Punjab and in the coming years may become a significant player at least in a few circles.

As per BNP Paribas, incumbents were demanding floor pricing for services as well as restrictions on promotions. However, the does not see any need for these as promotions benefit consumers and promotions by one operator compels counter promotions by other operators.

First Published: Tue, February 20 2018. 19:21 IST