Sucheta Dalal :Competition taking its toll—Bharti Airtel slashes prepaid tariffs
Sucheta Dalal

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Competition taking its toll—Bharti Airtel slashes prepaid tariffs  

September 25, 2009

Bharti Airtel Ltd, India's largest telecom operator, has announced a new tariff plan, Advantage Airtel, to its prepaid subscribers that offers local and national long distance calls at 50 paise per minute. However, there is a catch; you will have to pay an additional Rs50 per month to avail these rates.

Time and again all mobile services providers come out with various tariff plans, the latest from Airtel has its own reasons. "The surge in Tata Teleservices Ltd's (TTSL) August net-adds, clearly suggested that incumbents were losing traffic and minutes of use, with rapid proliferation of multiple SIM ownership. Post the latest cut, Bharti’s tariffs compare well with TTSL's ‘normalised’ GSM tariffs, though still higher than the ‘promotional’ or limited period, rates offered by TTSL," said Anand Rathi Financial Services Ltd, in a report.

During August, TTSL added 3.4 million subscribers while the same for Airtel was 2.8 million. Idea Cellular added 1.5 million new subscribers, while ADA group company, Reliance Communications Ltd (RCom) could garner only 1.7 million subscribers, in both GSM and CDMA segments.

TTSL had showed a healthy growth in new additions in July as well with 2.2 million new subscribers. “While TTSL has shown a growth of 50% or more in new subscriber additions in July and August 2009, other telecom operators have shown flat or negative growth in new additions in the same period,” TTSL said in a release.

The wireless industry is set to witness a flurry of new entrants or network expansion by existing smaller players, resulting in 12-14 players in each circle from 5-6 at present. With the backing of experienced global and regional players and about $6 billion of initial funding committed by them, the new entrants appear well-poised for their initial rollout plans. Also, these players will have a shorter time to market and lower capacity expansion needs due to a predominantly shared infrastructure model.

However, average revenue per user (ARPU) of incremental subscribers—given that growth would now come from the ‘lower rungs of the economic pyramid’—is likely to be at a steep discount to the industry average, said IDFC-SSKI Securities Ltd, in a report.

As past experience suggests, the lowest ARPU is often reported by the latest entrant in any circle—for example, Aircel’s ARPU in Kolkata, launched in May 2008, Bihar and Himachal Pradesh, both launched in January 2007, is at a discount of 73%, 56% and 64% respectively to the average ARPU in these circles, the report added. - Yogesh Sapkale [email protected]n


-- Sucheta Dalal