Data price rise may not lead to telco revenue growth

At present, income from data operation constitutes 15 to 19 of total revenue of telecom cos

The hike in mobile Internet tariff plans announced by Idea and Airtel may not necessarily lead to revenue growth because several layers of plans dilute the headline rate, analysts tracking the sector say.

“Price hikes do not work for this sector, historically they never have. I do not think the data price rise will result in revenue growth or increasing realisations,” said Vivekananda Subramaniam, research analyst with HDFC Securities.

Income from data constitutes 15-19 of the total revenue of telecom companies in India, including dongles and broadband.
 

THE STORY OF HIKE & PROFIT

• Airtel and Idea Cellular have raised the price of 1 GB 3G data to Rs 300 in select circles in June from Rs 250
   
• Rates for 2G data have been raised by up to to Rs 200 from Rs 175
   
• Airtel offers 2 GB of 3G data for Rs 500
   
• Vodafone continues to offer 3G data at Rs 250 in all circles
   
• Even after the price hike, analysts feel, there will not be large effect on demand

Market leader Airtel and third biggest player Idea Cellular have raised the price of 1GB 3G data to Rs 300 in select circles in June from Rs 250 earlier. Rates for 2G data have also been raised by up to to Rs 200 from Rs 175 earlier. The hike came soon after the telecom regulator announced measures that affected voice call margins. However, since the hike was not announced nationwide, analysts said they were not sure whether it would push net sales.

“Within the headline tariff, there are so many schemes, plans and discounts that I am not sure it will lead to any actual surge in the top line. It is difficult to figure out whether the price rise will any effect on revenue in the July-September quarter,” said a telecom analyst with a city-based brokerage firm.

Airtel offers 2 GB of 3G data for Rs 500 while for 1GB it charges Rs 300. These kind of plans dilute the headline tariff, according to the analyst.  

Vodafone, the country’s second largest telecom operator, continues to offer 3G data at Rs 250 in all circles. It recently announced it would double the data at existing rates for new consumers. Even after the price hike, analysts feel, there will not be large effect on demand as most operators are offering data at similar prices.

“All of them have priced data rates strategically so there is no price war. They can charge high rates until Reliance Jio launches its service. The new entrant might take the advantage of the high rate to gain market share,” said Rishi Tejpal, an analyst tracking telecom companies in Gartner.

Reliance Jio Infocomm is the only operator that has 4G licences for all the 22 telecom circles. As telecom operators are anticipating cut-throat competition in the mobile Internet segment once Reliance Jio rolls out its services in December, they are trying to start services around the same time to grab market share.