Idea sees higher margins from data rate cut

Joins Vodafone and Reliance Comm in slashing data tariffs

Having slashed data rates by 90 per cent, Idea Cellular expects this move would help improve margins.

In the case of voice services, lower rates would mean lesser realisations. However, it is a different ballgame when it comes to data. While the number of data users is low at present, operators will benefit as more people start using data services.

“Whenever data tariffs are cut, more customers get added and existing subscribers increase their usage, too. Within a short period of time, decrease in data tariffs gets covered by increase in usage. So, revenues get protected,” said Ambrish Jain, deputy managing director.

As data usage increases, the overall average revenue per user (Arpu) will only increase in the long term, adding to the company's margins.

The operator is trying to cultivate a ‘data-using culture’ among its subscribers. With more subscribers shifting to data services, its networks get optimally utilised. In the 10 circles where Idea has 3G data, it brought down 3G data rates on par with 2G data rates. “The 3G networks are high-speed and designed for data,” said Jain. With the reduced rates, users of Idea 3G will be able to save 30 per cent on their monthly usage bills, he added.

At present, Idea's data rates are two paise per 10 KB on a pay-as-you model.

Two weeks ago, Vodafone, too, had cut its data rates, by 80 per cent. Reliance Communications is another operator that has brought down its 3G data rates, to equate these with 2G rates.

“Subscribers who use internet packs already have lower rates. We have just reduced the ones for pay-as-you-go where new users will come in and try data without inhibitions as the rates are low. Our data rates are already the lowest in the world, just like voice rates,” Jain claimed.

Currently, 25 per cent of all cellphone subscribers in India use data services.

“In the next couple of years, data-using subscriber base should grow to 70-80 per cent of the total subscriber base. This will happen as data users, application usage and smartphone usage increase. That is the industry phenomenon, not our customer base,” said Jain.

A little more than a fourth of Idea’s subscribers use data services. The operator has 33 million data subscribers and its total subscriber is 127 million.