As Reliance Jio's commercial launch nears, incumbent telecom operators Airtel, Vodafone and Idea have cut tariff and bundled free calls with data to drive mass market adoption, brokerages said.
The industry has been trying various data pricing strategies, with Bharti Airtel, Vodafone and Idea trying innovative price structures.
Market leader Bharti Airtel yesterday announced two plans with data tariffs effectively lower by an eye-catching '80 per cent'.
But the Rs 51 per GB data versus industry norm of Rs 250-plus comes with the caveat of an upfront payment of Rs 1,498 for a year. This essentially translates into 30 per cent saving for someone using 1 GB per month data and 37 per cent for 2 GB a month users.
"In the past, 'high upfront charge, low recurring recharge' kind of plans have rarely found mass market appeal, more so when the benefit is spread out over a year. So we conclude that the addressable market for tariff cut plan appears quite small," Credit Suisse said.
UBS said Airtel, Idea and Vodafone have all increased data quotas on prepaid internet packs. "Our back-of-the-envelope calculations suggest mega saver packs are 35-40 per cent further cheaper than the traditional plans. We expect strong data traffic to compensate for declining data realisations," it said.
The entry of RJio, it said, will further accelerate data adoption with affordable 4G handsets and data tariffs.
JP Morgan said: "As RJio commercial launch nears, we are seeing tariff cuts from the incumbents with free calling being bundled together with data for some select high value plans, while there are also data tariff cuts."
From RJio's perspective, the key data point is the tariffs and how competition reacts to it. "If the plans are at a discount to current data tariff plans, then does the industry cut tariff to match RJio? Also what is the level of discount, if any, to current plans and how this would impact RJio's financial case would need to be seen. Voice tariffs though not much talked about are also important," it said.
Goldman Sachs said Jio network is now available for free to most 4G smartphone users, with subscribers getting three months of unlimited data, voice and a suite of apps for free.
"The response to this new entrant into India's telecom industry has been positive, with long queues in company stores. We expect Jio to garner 35 million subscribers over the next two years, with data volume growth for incumbents slowing to 50 per cent in FY17 from 70 per cent in FY16," it said.
Voice revenue growth has picked up in the last two quarters driven by strong volumes and stabilizing tariffs.
However, slowing data growth has become a concern for telcos, with revenue growth down to 32 per cent in first quarter as compared to 72 per cent in the same period a year ago.
Goldman Sachs expects smartphone penetration in India to reach 56 per cent by FY21, from current 27 per cent, with 62 per cent of all smartphone users using high-speed data versus 50 per cent today.
UBS said Airtel's tariff plans "is a smart strategy ahead of Reliance Jio as it looks to be an effective way to lock in customers and build loyalty in a prepaid market."
Also, it should help increase data usage per subscriber, which is currently at 904 MB per month, as well as improve capacity utilisation in Airtel's 3G and 4G network.
Given 3G and 4G are spectrally more efficient, there has been significant additional data capacity created by Airtel in India.
Credit Suisse said operators, including Bharti and Idea, have introduced smaller ticket monthly 3G/4G data plans starting from as low as Rs 9 (for 20 MB, 28 days).
"It is not clear what has triggered this sudden change in strategy (an imminent entry of a new operator, a significant scale of capacity addition as seen in our recent report, stagnation of data penetration growth, or a combination of all the above)," it said.
The introduction of small ticket monthly plans should help kick start growth but opens the risk of negative surprise on data ARPUs, it added.
