For telcos, data war may not be a bad thing

With Mukesh Ambani-owned Reliance Jio Infocomm set to launch its services soon, existing telecom operators, including market leader Bharti Airtel, Vodafone and Idea Cellular, have made data substantially cheaper as they look to ward off competition from the newest entrant.

The  existing players are also coming out with innovative plans to draw customers — free voice calls on certain post-paid plans and talk time for call drops.

All these moves by telcos are undertaken to protect their turf against the imminent entry of Reliance Jio, which is likely to further intensify competition in the industry.

Reliance Jio, the telecom arm of Reliance Industries, has announced that it would launch commercial 4G services in the  six to eight weeks. The entry of Jio is expected to set off a rate war among operators and push tariffs for data services down further.

However, this may not necessarily be a bad thing for telecom companies. Analysts believe making mobile data more affordable will fuel mass market adoption of data services, and, in turn,  help companies improve their bottom line.

It is, however, not an out-and-out tariff war. Instead of slashing prices, some telcos have simply increased the benefits in their packs. So, for the same price, more data is being offered to customers now.

Airtel, for example, has effectively slashed data prices by 67 per cent for its prepaid customers by adding more benefits to its existing packs. Idea Cellular has also done the same for its third and fourth generation (3G/4G) internet packs for both postpaid and prepaid customers. Similarly, Vodafone is offering more data benefits to customers, thereby reducing tariffs by up to 67 per cent.

According to a note by UBS, the move by Airtel and Idea is aimed at pre-empting any subscriber loss and improving capacity utilisation. Telcos have created a lot of capacity with accelerated 3G/4G rollout in the last six months. This means they are well-placed to handle any spurt in data usage.

“We expect the trend of declining data realisations to continue. We estimate data realisations to further reduce by 15 per cent/14 per cent/13 per cent in FY17/18/19 for both Airtel and Idea. We, however, expect strong data traffic to compensate for declining data realisations,” UBS added.

Reliance Jio, which launched its preview offer last year, is proving to be a strong competitor already.  The company says it has about 1.5 million test-users and the average monthly consumption per user is in excess of 26 GB, whereas voice usage is 355 minutes.

“Reliance Jio’s data usage per user is nearly 40X the current industry average,” says Morgan Stanley in a report.

“Jio’s share in overall MB’s on the network during the quarter stands at 20 per cent of the industry and has already exceeded that of Idea and is inching up to Airtel, gaining 70 per cent of the incremental data market share. While this is a test phase and data is free, it does indicate the country’s potential data appetite and possible price elasticity,” the report adds.

So far, Reliance Jio has spent $21 billion on rolling out its network, and is currently carrying out carrier aggregations trials across bands.