Good days ahead as telcos cut tariffs

Readying themselves for a ‘disruption’ in the telecom sector, market leader Airtel and dominant players like Idea have announced massive cuts in tariff of high speed internet data services even as millions of consumers are expected to shift to Android-based smart phones coming up with feather touch solutions for financial transactions to government interface. Armed with adequate spectrum and committing themselves to upgrading their basic infrastructure, the existing operators are going paranoid after the trial launch of 4G data services by Reliance Jio of deep-pocketed Mukesh Ambani. Both Airtel and Idea have cut their tariff up to 67% not only giving a huge temptation to their customers but also trying to hold on to them, fearing they might shift to Jio which is set to roll out a range of data driven services with aggressive pricing.

So, the latest round of disruption in the telecom sector with over a billion subscriber base, is going to come from the elder Ambani sibling who has already made investments of $17-18 billion into building fibre-based broadband network, acquiring enough spectrum and developing strategic partnerships for infrastructure sharing including with firms owned by younger brother Anil Ambani. Experts see it as a ‘make or break’ for the senior Ambani who is expected to go all out for capturing a large size of the market which in turn would largely grow riding on data packages. In a convergence of sorts, these data packages would even carry voice forcing the existing telcos to rebuild their business models around the projected growth of smart phones from 220 million to over 700 million in the not too distant future. The high speed 4G network, amidst the talk of even 5G, would also involve ‘Internet of Things,’ which enables connectivity between different devices.

While some analysts argue the price war may further dent balance sheets of the existing operators,  the unfolding business scenario has to be seen in the context of three to four-fold increase expected in the data market which will largely be driven by initiatives like Digital India pushing internet-based government’s financial inclusion programme and excitement among e-commerce and telecom players to get aggressively into things like payment banks. Thus, the name of the game is going to be high volume, low cost, low margin model. However, the challenge for the telcos would be to monetise the data growth since the cash register from voice is only going to shrink. The consumer can surely look for better value for money along with many more value added services which will be rolled out by operators either by themselves or through strategic partners.