Free mobile minutes come in new avatar

Telecom companies are no more at open war, trying to cut rates and into each other’s subscriber base. But they have not stopped pampering subscribers with discounted plans and free minutes.

New operators, as usual, are taking the first step. However, these offers are also adding value, unlike earlier discounts which caused margin depreciation across the industry.

Videocon, the last entrant into the sector, has a new plan called ‘zero paisa per second’. Consumers who buy Videocon mobile handsets get freebies in service as well, with plans ranging from 10 minutes of local calls per day to unlimited local calls for a year. This is valid on seven of the company’s new range of handsets, which offers choices like touch phones, Qwerty, dual-SIM, Android and also the basic, sturdy ones.

Bundling handsets and telecom service is a successful practice abroad. Experts say it also adds to margins. “Operators are now focused on revenue and bundling helps improve margins. Margins in handsets are higher than in voice. When you bundle a more competitive product with a less competitive one, the resulting cross-subsidy can improve profitability in a fiercely competitive environment,” said Mahesh Uppal, Director at Comfirst.

Competing for share
Rate offers are mostly by those operators who are yet to gain market share in terms of subscribers. The top six operators together have a market share of 87 per cent, while the rest is divided between nine smaller ones.

Videocon launched its services in March last year and has a subscriber base of around 6.5 million. The two big incumbents, Bharti Airtel and Vodafone, add around two million subscribers every month. “Some of the new entrants really want to get market share, at least in subscribers. They are aggressive in offering free minutes and this trend is going to continue for at least six-12 months;, there is no other way,” said Sandeep Ladda, head-telecom, PricewaterhouseCoopers.

Tata Docomo had also launched a plan called Unpaid in partnership with the Future Group. Customers will be rewarded with free talk-time for every purchase above Rs 350 made at any of the Future Group shopping outlets such as Big Bazaar, Pantaloons, Central, Brand Factory, etc. For example, a customer on this plan will get Rs 150 worth of free talk-time as they buy products worth Rs 3,001. Both companies offer these services across 16 telecom circles.

This plan comes under the Unpaid label, but the company denies that free minutes will eat into their revenues. “If you look at it, Future Group is paying for these minutes, so it is not actually free. Both of us will gain from this partnership,” said Deepak Gulati, executive president, mobility business division, Tata Teleservices. However, he wouldn’t divulge details of revenue sharing between the companies.

Old operators, on the other hand, have reduced their exposure to free minutes. Vodafone, the second largest operator, offers free minutes and discounts in smaller towns where it is looking to add subscribers but in bigger ones, it offers only event-driven discounts. Reliance Communications, under pressure to increase average revenue per user, said it was planning to reduce discounts. In the past two quarters, it has reduced the free minutes it offers by half.

“We have drastically reduced free minutes that we offer in the last six months, because competition had bottomed out and the competitive pressures have reduced, too, since no new players have launched services,” said a top official from Idea Cellular.

Though pressures have reduced, the competitive spirit between operators continue, since the market has a lot of growth potential. “The possibility of being aggressive in the market cannot be ruled out, as it is growing. We are looking at 70 per cent teledensity and will reach 100 per cent in the next two years,” said Ladda.