Airtel's 4G Price Cut Signals Beginning Of Telecom War: Experts

Bharti Airtel on Monday announced up to 80 per cent reduction in its 3G and 4G mobile data packs in a bid to take on Reliance Jio, which is offering customers free 4G data for three months ahead of its commercial rollout.

Under Airtel's special scheme, customers who initially pay Rs 1,498 can buy additional 3G/4G mobile data packs at just Rs 51 per GB for a period of 12 months. At present, Airtel offers 1GB of 3G/4G mobile internet for Rs 259.

Though a full-fledged telecom war is brewing, Airtel's move seems to be at retaining its customer base, rather than taking on Reliance Jio head on, analysts said.

"It's to retain exiting subscriber base and to prevent meaningful churn when Jio launches its 4G services in market... You try to retain your subscriber base because a consumer who has already paid Rs 1,500 would avoid churning three months down the line when Jio is in the market," said Nitin Soni, director (Asian corporates) at Fitch Rating.

He added that Airtel's new scheme is just 25-30 per cent cheaper than its current plan, and not an 80 per cent reduction as claimed by the company.

"Overall, if you calculate the revenue per user in this scheme, it comes to Rs 175-180, which is 25-30 per cent lower than their current data tariff of Rs 250 per GB per month... It is not really that kind of an aggressive tariff cut," Mr Soni said.

Market expert Avinash Gorakshakar believes that Monday's price cut is just the beginning of a long battle in the hugely competitive telecom sector.

"Price cuts will be the order of the game to consolidate and retain market share. Jio will be targeting the data customers and then voice customers. The kind of pricing Jio will come in will hurt everybody and customers will benefit," he said.

According to Mr Gorakshakar, Reliance Industries' telecom business is unlikely to be EBITDA positive in its first two years of operations. However, Reliance would certainly go after market share gain as that would be the first yardstick from which Jio's business will be valued.

"A lot of companies will undergo consolidation or may get bought out, but customers will get better technology and competitive prices," he added.

Bharti Airtel shares underperformed the broader Sensex today. The stock closed 0.4 per cent lower at Rs 342.60 as compared to 0.4 per cent gain in the Nifty. Meanwhile, Reliance Industries shares closed 2.9 per cent higher at Rs 1,057.45.