Telecom Battle Intensifies With Pre-Paid Price War

The battle for supremacy in the fastest growing Mobile communications market intensified with Bharti Airtel slashing prices in the pre-paid segment and RCom reacting within couple of hours. ~80% of the mobile phone users are in the pre-paid category.

It has been widely reported in the press that Bharti has announced a reduction in local outgoing tariffs for its prepaid customers to a uniform Rs1/min from Rs1.20/min earlier. However on inquiry with dealers in the Karnataka circle they said Rs 0.79 / minute on the most minimum pre-paid recharge and Rs 0.30 for calls originating and terminating on Airtel network. 40-45% of CDMA operators revenues are from Local calls while it is 34-37% with GSM operators. RCom will be under severe pressure as it unveils multi-billion dollar capex for GSM operations.

Logically, lower tariffs will be offset by higher usage, sounds reasonable. However, we differ and we feel its because of the competition and to gain more customers before the entry of new GSM players in more circles. Recall, incoming calls were made FREE in India only with the entry of Reliance Infocomm. More innovative schemes will be launched in the next 12 months putting severe pressure to maintain margins.

With no new streams of revenues insight, the next few quarters will be tough for Telcos.

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