Bharti Airtel sounds price war bugle for 4G

Last Updated: Tue, Jun 25, 2013 04:03 hrs
An employee checks a customers' feedback book next to a Bharti Airtel logo inside its shop in Kolkata

Bharti Airtel, India's largest mobile carrier by subscriber base, on Monday reduced rates of fourth-generation (4G) services by 30 per cent, to bring these down below the 3G rates. Last year, operators had reduced 3G rates by 70-80 per cent.

With the price cut, a 10GB pack would cost just Rs 999 a month in 4G, while Airtel charges Rs 1,500 a month in 3G. While the new price for a 3GB data pack in 4G is Rs 650, Airtel charges Rs 675 for 3.1GB data pack in 3G. But a 2GB data pack would cost Rs 450 a month on 4G, Bharti Airtel said. A similar 2GB data pack costs Rs 450 a month in 3G.

The development comes within a week after the top three mobile service providers - Bharti Airtel, Vodafone and Idea Cellular - reduced 2G data prices by 80-90 per cent in select service areas, aiming to get fresh data customers, primarily in smaller towns in the pay as you go' model.

Interestingly, the revised 4G rates are similar to the revised 3G ones (reduced last year). But operators have said there is not much scope to reduce 3G rates further. The number of 3G subscribers has increased in the past year, but data revenue from all services still accounts for just five to seven per cent of telecom operators in India.

The reduction in 4G rates might not be just a step to attract users, given that Bharti Airtel is the lone 4G service provider in India. And in just four service areas - Bangalore, Kolkata, Pune and Chandigarh, where it has just a few thousand customers.

While Bharti declined to give subscriber details, Milind Deora, minister of state for communications and information technology, had, in September 2012, informed the Lok Sabha the company had signed up just 3,180 subscribers for 4G.

"The decision to reduce prices for 4G is not just to get more customers or encourage the existing 3G users to 4G. Bharti has already been making the pitch ready for a price war in 4G. When Mukesh Ambani's Reliance Jio launches 4G services (expected early next year) it will have to keep prices on par with the prevailing market rates, if not lower. It is most likely the market will have another round of price revision after Reliance Jio launches its services," said an analyst with a management consulting firm, seeking anonymity.

This is not the first time companies have revised data prices. In January this year, Bharti Airtel, Vodafone and Idea Cellular had increased rates for 2G data, which contributes four per cent of revenues of telecom operators, by 25 per cent, keeping the 3G prices unchanged to reduce the gap between 2G and 3G rates.

Bharti Airtel's 4G data plans now start at Rs 450 a month offering 2GB of 4G data. Other monthly 4G plans include 3GB for Rs 650, 4GB for Rs 750, 10GB for Rs 999, 12GB for Rs 1,299, 15GB for Rs 1,449, 25GB for Rs 2,049, 45GB for Rs 2,999, and 80GB for Rs 4,799. But users opting for the lower priced plans will not get any free access to movies and games on demand. Only plans above Rs 999 a month will have Airtel's 4G entertainment library.

"Operators are trying to increase data usage and that is why there are price revisions across services. Price revision depends on market demand. In most of the cases, operators are offering lower rates for incremental usages. Speed is key for users. Subscribers are not bothered about the technology. Higher speed at a reasonably lower cost would definitely boost data usages," said Rajan Mathew, director general, Cellular Operators Association of India.

Shift from 3G unlikely
Bharti Airtel is, however, unlikely to witness 3G customers opting to shift to 4G as they would need to invest additionally for devices, which are expensive.

Airtel offers long-term evolution compatible wireless devices, including multi-mode universal serial bus dongles (Rs 4,999) and Indoor Wireless gateway (Rs 7,750) that converts the 4G connection to Wi-Fi network that can be shared across multiple devices.

Bharti Airtel had 43 million data users, of which six million are 3G subscribers, till March 31. The data subscriber base rose 22 per cent during the January-March quarter and data revenue per user increased 25 per cent during the quarter. It gets 6.5 per cent of total revenue from data.

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